After two weeks in red, the crypto market has shown bullish signals since last weekend, but is it the time to celebrate?
Since the market crash, red has been the dominant color during trade, with bankruptcy news flooding in. Bitcoin and altcoins experienced significant volatility in the aftermath of global monetary tightening.
Bitcoin Shoots Higher
The largest coin by market cap fluctuated around $20,700 as of July 16, while Ethereum increased slightly to around $1,200 following the Merge updates. The majority of the top-tier cryptocurrencies were down.
Also last week, the US Bureau of Labor reported that the US inflation rate hit 9.1% over the same period last year, going down in history as the fastest increase since 1981.
Additionally, the monthly Consumer Price Index (CPI) also increased by 1.3% due to record high gasoline prices. The shocking inflation data could be a driver for the coming interest rate announcement.
The Fed raised interest rates by 0.75 percentage points at its June meeting, citing it as an urgent measure to combat inflation. The agency stated that it would do everything possible to reduce inflation, even if it came at a cost.
Inflation May Hit Cryptos – Again
The news that US inflation reached a new high in June prompted the global crypto market to brace itself for the possibility that the Fed would raise interest rates to 1 percentage point rather than 0.75 points in July.
However, experts believe that the impact of this increase will be minimal. Following the release of the inflation data, the market dropped but quickly recovered over the weekend.
At the time of publication, Bitcoin was trading for around $21,000, while other currencies had recovered on Monday.
The overall scenario hasn’t changed much until the market receives clearer signals from central banks around the world about how to deal with inflation and whether their impact will push the economy deeper into a recession.
What Comes Next Week?
Fear of a recession is the most prominent issue in recent times when investors predict that the strong moves of the US Federal Reserve (Fed) to curb inflation will push the economy up.
Inflation in the US in June increased by 9.1%, but people believe that the actual figure could have been higher. Not only the U.S., but Europe is also facing high-level inflation.
The European Central Bank has not raised interest rates yet. The Euro is also depreciating a lot against the USD and the Euro slipped below parity with the USD.
On July 14, Fed’s Board member Governor Christopher Waller said he may support a rate increase of 1 percentage point this July – the highest over 30 years, a sign that the Fed is determined to fight high inflation.
While rising debts and prices raise concerns about the risk of falling into inflation, Waller expressed confidence that the US economy can avoid this risk thanks to a strong labor market.
In addition to the Fed meeting, the GDP report, which will be released on July 28, is also another important event. The results will reflect the economic growth of the country.
Data released on April 28 showed that the GDP of the world’s largest economy unexpectedly dropped by 1.4% in the first quarter of the year.
Experts say that a decline in GDP does not mean that the country is about to fall into a recession. Because this metric is influenced by many temporary factors, such as a huge trade deficit due to supply chain disruptions.
There will be many important events coming up next week, and the market, in general, remains uncertain.
According to data from Coinshare, trading volume on the crypto spot and derivatives exchanges has dropped more than 15% since May to around $4.2 trillion amid an extended market correction.
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Author: Nicholas Say