Due this week are the US Consumer Price Index (CPI) and Producer Price Index (PPI), hence, the market for cryptocurrencies is probably going to be quite erratic. Crypto market volatility, Risk in the bitcoin market. Higher than predicted inflation rates could cause a disastrous fall in the bitcoin market and, more especially, a new all-time low for the price of Bitcoin.
These figures are significant since they will affect the interest rate decision of the Federal Reserve and will be published prior to their March 18–19 conference. We might look at the possible consequences on the bitcoin market and how the forthcoming data could influence Fed’s ruling.
US CPI and PPI Data as Crypto Markets Prepare
Importantly, on March 12th, the US Consumer Price Index (CPI) report will be released, and on March 13th, the PPI report will follow. Because these macroeconomic factors can potentially induce significant market volatility, they have caused crypto traders and fans to be anxious.
An expectation of a 0.3% increase in the US CPI for February is based on a Reuters survey. The consensus on Wall Street is that the CPI will come in at 2.9%. If the report indicates a spike in inflation, the cryptocurrency market could experience a decline. A senior portfolio manager at Allspring Global Investments named Bryant VanCronkhite made the following statement:
A hot CPI print will likely scare the market. The market still wants the Fed to come to the rescue… Until inflation and inflation expectations come down, the Fed is handcuffed.
Fed’s Next Move Hinges on CPI and PPI Data
Interestingly, the Federal Reserve’s meeting comes following the release of US CPI and PPI data. These reports could significantly impact the central bank’s interest rate and Crypto Market decision.
The Federal Reserve is projected to retain its benchmark interest rate between 4.25 and 4.5 percent for the agenda item, according to the results of the CME FedWatch tool. Still, Fed funds futures statistics from LSEG show that market expectations point to further easing on the road, with cuts of around 70 basis points projected by December. The PPI and CPI numbers indicate a strong inflation rate that would cause the Fed to consider raising or maintaining their current interest rate.
Federal Reserve Chair Jerome Powell has responded with hawkish language on lowering interest rates. Powell claims that:
We have changed our policy stance even though the economy still performs nicely. We should not feel under duress to rapidly alter our policy stance.
Drops in the crypto market notwithstanding
Following the US CPI data release in February, the bitcoin market underwent a significant selloff, resulting in a 3.3% decline to $3.1 trillion. With a 3% drop in CPI statistics showing a higher-than-expected inflation rate, Bitcoin dropped to $94,000.
Given this, another downfall in the bitcoin market is expected for next week. Moreover, $409 million came out of the Bitcoin ETFs. The largest outflow was $160 million from ARKB of 21Shares; the second was $154.9 million from Fidelity’s FBTC.
Still, according to Crypto Caesar, the present gloomy sentiment is the last obstacle before the bull market starts. Crypto market volatility claims that most Binance Futures traders—63.13% exactly—have started long bets in Bitcoin. This suggests that investors have high expectations regarding the future rise of the price.
Summary
The very sensitive nature of the bitcoin market to the forthcoming CPI and PPI figures could cause erratic price swings. Inflation might drastically reduce the value of Bitcoin. Some people think this could be a “bear trap” from which the market will finally escape. Traders are hopeful that even if the Federal Reserve responds significantly to this news, it might indicate a positive long-term turnaround. The course of the market will rely on what happens in the following few days.
