Introduction to the Crypto Market
The crypto market is eagerly waiting for the upcoming US CPI data, which is expected to impact the sentiment of the broader financial sector. The US government shutdown has left investors wondering about the potential next move of the US Federal Reserve. Trade tensions between the US and China have further worsened the scenario, impacting crypto prices. Bitcoin’s price has retreated from its all-time high to as low as $103k, while altcoins like Ethereum, XRP, and others have also crashed.
Understanding the US CPI Data
The US CPI data is a preferred metric for the central bank to gauge inflation. The discussions have further intensified as it is the only major economic release ahead of next week’s Fed meeting on their policy rate plans. It’s worth noting that the crypto market is now expecting two more rate cuts this year, which might help in a strong recovery of the risk-bet assets. A softer print is likely to boost the broader financial market sentiment, potentially helping in the crypto prices rally. On the other hand, if the inflationary pressures come in hotter-than-expected, it could worsen the selling pressure.
Current Expectations on the US CPI
All eyes of the financial sector, let alone the crypto market, are now on the upcoming US CPI data later this week. The data, expected to be released on Friday, would set the stage for the potential move of the US Federal Reserve with its policy rate plans. According to Wall Street expectations, the US CPI is expected to remain unchanged at 0.4% for September. The Core CPI, which excludes the food and energy prices, is likely to come in at 0.3%, as compared to the same reading recorded in August. On the other hand, the inflation on a year-over-year basis (YoY) is expected to surge to 3.1%, as compared to the prior month’s reading of 2.9%. The Core CPI on a YoY basis is likely to remain unchanged at 3.1%.
Impact of the Fed Rate Cut on Crypto Prices
The market is now pricing towards two Fed rate cuts through the last quarter of the final year. According to the CME FedWatch Tool data, there are 97% odds of a potential 25 bps rate cut at the upcoming meeting of the US central bank on October 29. Besides, another rate cut of 0.25% is expected at the Fed’s gathering in December. Now, the crypto market is awaiting the upcoming US CPI data to cement bets over the potential rate cut next week. A softer US CPI print would lift the market sentiment, potentially triggering liquidity expectations. Notably, the lower interest rates usually help in the rally of the crypto prices.
The Role of Gold in the Crypto Market
The recent dip in the gold price indicates that the precious metal has already peaked. For context, the gold price has continued to decline for the second straight day, witnessing a record decline since 2020. Considering that, analyst Michael van de Poppe said that the fund may now rotate from gold to BTC and then towards altcoins. This could potentially lead to a strong recovery of the crypto market.
Conclusion
In conclusion, the upcoming US CPI data is expected to have a significant impact on the crypto market. A softer US CPI print and the anticipated Fed rate cut might help in a strong recovery of the crypto market. The market is eagerly waiting for the US CPI data to cement bets over the potential rate cut next week. As the crypto market continues to evolve, it’s essential to stay informed about the latest developments and their potential impact on the market. With the right information and analysis, investors can make informed decisions and navigate the complex world of cryptocurrency.
