TL;DR Breakdown
- Inflation in August has affected crypto prices and ushered in a bloodbath for Bitcoin and Altcoins alike.
- The inflation levels in August have slightly decreased from a staggering nine percent in June but are still above the Fed’s 2% target.
- Crypto market analysts point out a bear market possibility, while others remain hopeful that Bitcoin halving in April 2024 will usher in the long-awaited bull run.
Description
August was an unfavorable month across the USA, with soaring inflation. However, crypto prices have stalled without forming any distinct trends. Bitcoin continues to flirt with the 30,000 mark, as Ethereum shows an upward trend. The inflation levels in August have slightly decreased from a staggering nine percent in June but are still above the … Read more
August was an unfavorable month across the USA, with soaring inflation. However, crypto prices have stalled without forming any distinct trends. Bitcoin continues to flirt with the 30,000 mark, as Ethereum shows an upward trend. The inflation levels in August have slightly decreased from a staggering nine percent in June but are still above the Fed’s 2% target.
The Consumer Price Index (CPI) rose by about 4% in the last year through August. The Bureau of Labor Statistics(BLS) also stated this was slightly above the 3.6% expectation. The increase in gas prices led to the 0.6% index rise in August after 0.2% in the previous two months. According to the BLS, the gasoline price increase was responsible for half the index’s rise.
August’s crypto performance amid inflation
Bitcoin was trading at the $26,100 mark on Wednesday, which had stalled for one day, according to data collected by CoinGecko, while ETH had slightly decreased by 0.5%.On the daily charts, despite the current economic times, BTC/USD has held a support of around $28000.
The volatility in the market has not affected the higher top-higher-bottom trend established late last year, indicating that the trend remains constant. Only a slump like that experienced in June would trigger the overall bullish expectation.
Ethereum experienced a sharp increase in the trading pair, ETH/USD, in June. However, this trend has stalled in the past month. Altcoins such as Polkadot also saw meager losses as well.
A BTC/USD 240 Minutes Chart
Source: Trading View
The Feds moves after the CPI report
The fed will weigh in the Wednesday report as one of the factors, alongside the labor market’s strength, ahead of the interest rate announcement late this month. The Federal Reserve System responded to the June 9.1% inflation rate by stiffening its monetary stance by increasing interest rates; this inflation level was the highest seen since the recession.
High-interest rate policies cool the economy since investors, consumers, and entrepreneurs experience difficulty borrowing. Thus, less money is released into circulation, balancing the demand and the supply and cooling inflation.
The high interest rates have also affected cryptocurrencies and other assets such as stocks as investors shift their interest to assets such as treasury bonds. Although inflation has considerably reduced from the June high, the trend is still the 2% fed target, leading to a potential rate hike.
The Fed bumped up its interest rate to 5.25% and 5.5% in July after it had backed away from doing so in June. The CPI report on Wednesday, even though indicated an increased inflation rate is trending in the right direction, the core inflation is said to have decreased by 0.2% year over year in August.
According to Butterfill, the inflation in August raises no cause for alarm to prompt another interest hike; he also added that cryptocurrency prices have slightly changed in response to the central bank’s news.
According to the CME Gropus Fedwatch Tool, investors have pinpointed a high chance, after the report, that the Fed would keep the interests at a brisk pace after its meeting on September 20 with a chance of a 5% cut in January 2024.
Impact of Feds policy on digital assets
Crypto prices dipped in August after the Federal Reserve affirmed the interest rate hikes. Bitcoin dropped 2% overnight, which brought the crypto market down, where the total market cap fell by 1.7%, and Ethereum dropped by 1.5% as the dollar index increased, hitting a month-high.
Traders expected the July hike would be the last. However, the Fed says the inflation fight is far from over, thus the roaming second hike this year. The reserves hike has significantly limited the rise of assets such as cryptocurrencies and stocks as investors opt for safer bets such as bonds.
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