Crypto market trades sideways as inflation fears kick in, what’s ahead?
The past week brought hope and confidence to many crypto participants. This is due to the growth seen in most major cryptocurrency tokens as they witness some price increase. However, happy days seem to be cut short suddenly as prices turn around.
The past 24 hours have thrown the crypto market into a state of confusion and excitement as prices plummet. Some crypto experts fear that rising inflation could lead to another period of bear markets. Most of the leading crypto-assets are experiencing a downward climb after rising significantly in the previous week’s space.
Bitcoin price has fallen below the $23,000 level again. It is currently trading around $23.0760 after climbing up to $24.500. Ethereum is not doing any better as the price came to $1,570 from $1,764. However, it has shown a slight price increase to be at $1,688 at the moment. There are also price losses for Ethereum Classic and Cronos.
Trivariate’s founder and CEO, Adam Parker, pointed out during an interview with CNBC that the CPI is contributing to the current situation. Parker stated that the CPI is likely to retain its high position.
According to Parker, he has yet to notice any supportive intent from the Fed. He further observed that the housing market is experiencing an increase in rents of up to 12% annually.
CPI plays an important role in the crypto market trend
The Consumer Price Index (CPI) is an important indicator that the Fed uses to measure inflation. But some experts have no confidence in the index because of its lag. For them, it will take quite a long time before the CPI is eased. Generally, the CPI needs to fall below 2 for a significant price increase for both crypto and stock markets. However, this can only happen with a massive recession.
Other experts have different opinions about the pending events. For Chris Toomey of Morgan Stanley, inflation has not yet peaked. According to him, the global GPD causes more concern. Therefore, the current inflation is becoming structural rather than transitory.
The effect of inflation increase can be quite drastic on the prices of cryptocurrencies. The Federal Reserve has tried to control its influence by using interest rate hikes and quantitative easing. In June, cryptocurrency was thrown into a bloodbath when the Fed imposed a 75 bps interest rate hike.
Since the July CPI showed rising inflation, the crypto market showed no significant decline. Some experts explained that the market had previously participated in poor CPI data followed by an increase in interest rates.
Several players expect a positive reversal of the CPI value in August with a course reversal from the Fed. Any contrary condition is likely to push the crypto market into a bearish trend.
Featured image from FX Empire, Chart from TradingView.com