Bitcoin and Ethereum have reacted negatively to consumer price index (CPI) prints in the United States. The metric is used to measure inflation in US dollars and reached 9.1% for June which represents an increase from the May results.
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At the time, the crypto market crashed in the days following the CPI print. This meant inflation was still rising and hinted at more intervention from the US Federal Reserve (Fed). Higher inflation translated into higher pain for bitcoin and other riskier assets.
At the time of writing, BTC price is trading at $19,400, down 3% over the past 24 hours. ETH price is trading at $1,000 with a loss of 3% over the past 24 hours, indicating a potential further loss for the two major cryptocurrencies by market capitalization.
Economist Alex Kruger noted a 40% drop in the price of these digital assets and a 7% drop in the S&P 500. The downside action is supported by expectations that the Fed will become more aggressive as inflation trends. economist Told,
The final CPI numbers triggered a massive crash, with the S&P falling 7% in 2 days. Meanwhile the ensuing crypto crash was so intense that the CPI could be relabeled as the Crypto Pain Index.
However, Kruger believes that this time around Bitcoin and Ethereum will be more impervious to CPI prints. Last time this metric went public, it beat market expectations, this time inflation remained within expectations.
Thus, this metric may have a price effect. According to the Economist, the market has “sold a lot before Sunday” in anticipation of the June CPI.
Inflation may have peaked, but Kruger believes that there are out-of-date data for various sectors used to measure inflation. This points to a fall in energy prices, which should contribute to the fall in the July CPI. This could provide some breathing room for Bitcoin and Ethereum.
Important references ahead of tomorrow’s CPI release:
Last month’s headline inflation will be heavily influenced by stale gas price data:
Retail prices have declined from June’s average and fall in oil prices and gas futures suggest they have to fall further. pic.twitter.com/3wmwqHzRH3
— Brian Deese (@BrianDeeseNEC) 12 July 2022
Why bitcoin may be experiencing relief in the coming months
Furthermore, the economist claims that there are no major events in the future that could negatively affect the price of BTC. The Fed is set on a 75-basis point interest rate hike, the price of which is also set by the market following the capitulation event.
In the near term, the June CPI print could contribute to the price decline in the traditional market. As has been happening in the past months, this selling pressure will spread across the crypto market, but without turning into a “trend defining” phenomenon.
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The key to a potential recovery will be on traditional equities. Once the stock starts to move upwards, the crypto market will find a solid bottom, and many believe that there will be more pain in these assets in the coming months.
The market agrees with my view: The inflation numbers are nothing like the June numbers, not the trend-defining one.
Too much unreasonable panic there.
— alex kruger (@krugermacro) 13 July 2022