Last week, the crypto market faced a major crash, triggered by bearish reports. Though there's been some recovery, volatility persists due to the upcoming Consumer Price Index (CPI) report, which could bring further fluctuations. Here's what to expect.
US Inflation's Impact on Crypto
Crypto prices have risen for five straight days, driven by easing recession fears after positive jobless claims data. Bitcoin and several altcoins surged over 35% from their weekly lows.
The U.S. jobless claims report(https://www.dol.gov/ui/data.pdf), released on August 8, showed a drop in unemployment filings to 233,000 from 250,000 the previous week. This came after another report revealed the unemployment rate increased to 4.3%, the highest since 2021.
June's CPI data showed a 0.1% decrease in overall prices and a slight 0.1% rise in core CPI (excluding food and energy). The annual inflation rate was 3% overall, with core inflation at 3.3%.
Economists expect the upcoming CPI report on August 14 to show a slight dip in inflation, with overall CPI dropping from 3.0% to 2.9% and core CPI from 3.3% to 3.2%.
Could Rate Cuts Boost Bitcoin?
A drop in inflation could benefit Bitcoin and altcoins by influencing the Federal Reserve's decisions. The Fed hinted at possible interest rate cuts in September, with analysts debating a 0.25% or 0.50% reduction.
The Federal Reserve Bank of Cleveland predicts a 0.24% increase in headline CPI and a 0.27% rise in core inflation for July.
Banks like ING and Citi expect a 0.50% rate cut, while Goldman Sachs and Societe Generale predict a 0.25% reduction.
Cryptocurrencies tend to rise when the Fed cuts rates. During the pandemic in March 2020, the Fed reduced rates to zero, leading to Bitcoin's surge to an all-time high of $69,000 in 2021.
If the Fed implements a significant rate cut, Bitcoin could approach the $70K mark by the weekend.