Many crypto enthusiasts have felt hopeful and confident over the past week. The price rises of most cryptocurrency tokens have fueled this optimism. But, the good times seem to end abruptly as prices turn in the opposite direction.
In the last 24 hours, crypto markets have been in a confused state. Prices are dropping and there is tension. Some experts worry that an increase in inflation may lead to another bear market. Most of the leading crypto assets are experiencing a downward climb after rising considerably in last week’s space.
Bitcoin has fallen to $23,000 once again. It’s currently trading around $23,0760 after it had climbed up to $24,500. It isn’t doing much better, as Ethereum has seen its value rise to $1570, from $1764. But, the price has shown some improvement to stand at $1,688 right now. Cronos, Ethereum Classic, and Cronos also have price drops.
Trivariate’s founder and CEO, Adam Parker, during an interview with CNBC, pointed out that CPI is contributory to the present situation. Parker said that CPI will likely maintain its current high status.
According to Parker, he’s yet to notice any supportive intent from the Fed. Parker further noted that there is a rise in rent every year on the housing market, which can reach as high as 12 percent.
CPI plays a vital role in the crypto market trend
For gauging inflation, the Fed relies on the Consumer Price Index. However, experts don’t trust the index because of its slow pace. According to them, CPI would need to rise slowly. CPI has to be lower than 2 in order for crypto or stock market prices to rise significantly. This could happen only if there is a severe recession.
Different experts may have different views on the future. According to Chris Toomey, Morgan Stanley’s Chris Toomey, inflation has yet to reach its peak. The global GPD, according to Toomey, is raising more concerns. Therefore, inflation at the moment is structural and not transitory.
Inflation rises could have a dramatic impact on cryptocurrency prices. Federal Reserve tried to curb its impact by raising interest rates and tightening the belt. A 75-bps rate increase was inflicted by the Fed on June 18, causing cryptocurrency to be in turmoil.
The July CPI data showed an increase in inflation. However, crypto markets did not experience a significant decrease. According to experts, some market participants had been exposed to poor CPI data that was followed by an increase of interest rates.
Numerous players predict a positive change in CPI values for August and a Fed reversal. A negative condition could push crypto markets into bearish territory.
Featured image taken from FX Empire. Chart by TradingView.com