Last week, the crypto market experienced one of its major crashes in 2024, triggered by multiple bearish reports. Since then, the market has shown signs of recovery, though it continues to fluctuate near resistance levels. This instability is because of the anticipated CPI report due later this week, which could lead to further volatility in crypto prices. This article will explore potential market trends for the coming week as the CPI report’s release approaches.
US Inflation Sets The Crypto Sentiment
Crypto prices have climbed for fifth straight days, triggered by declining fears of a U.S. recession following positive jobless claims figures. The market was awash in green, with Bitcoin and several altcoins surging over 35% from their weekly lows.
The recent rise in both the crypto and stock markets was largely triggered by the U.S. jobless claims report released on August 8. According to this report, fewer people filed for unemployment last week, with numbers dropping to 233,000 from 250,000 the week before.
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This data came shortly after another report showed that the unemployment rate had increased to 4.3%, the highest it’s been since 2021.
The CPI data for June showed a small decrease of 0.1% in overall prices from the previous month, and a slight increase of 0.1% in core CPI, which doesn’t include food and energy prices because they tend to change a lot. The report for June also showed that the annual inflation rate was 3% overall and 3.3% for the core measurements.
Looking ahead, August 14 will be a key date for the crypto industry, as the U.S. will release its latest Consumer Price Index (CPI) report. Economists expect this report to show a slight decrease in inflation, with the overall CPI expected to fall from 3.0% to 2.9% in July. The core CPI, which doesn’t include food and energy prices because they can be very unpredictable, is also expected to drop slightly from 3.3% to 3.2%.
Bitcoin Could Benefit From Rate Cuts
A drop in inflation could be good news for Bitcoin and altcoins because it affects decisions made by the Federal Reserve.
During its July monetary policy meeting, the Fed suggested that it might lower interest rates in September. Now, analysts are split on whether this rate cut will be a modest 0.25% or a larger 0.50%.
The Federal Reserve Bank of Cleveland’s latest predictions show that the overall inflation rate (headline CPI) is expected to be 0.24% for July, and the core inflation rate, which excludes food and energy prices, is expected to be 0.27%.
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Some banks, such as ING Bank and Citi, predict a 0.50% rate cut, while others, like Goldman Sachs and Societe Generale, expect a smaller 0.25% reduction.
Cryptocurrencies generally increase in value when the Federal Reserve lowers interest rates. For example, in March 2020, during the pandemic, the Fed cut the official cash rate to zero. Following this, Bitcoin’s value soared, reaching an all-time high of $69,000 in 2021.
If the Fed makes a significant rate cut this time, we might see Bitcoin price heading toward the $70K mark by the weekend.
