The latest inflation figures have paved the way for a possible change in monetary policy. Experts believe that this could herald a boom for cryptocurrencies.
What happened: As the Federal Reserve mulls interest rate cuts, financial analysts point to a changing economic environment that could favor digital assets in the coming months.
According to the U.S. Labor Department’s report released on Wednesday, inflation rose as expected in July, mainly due to higher housing costs.
The Consumer Price Index (CPI), a comprehensive measure of the prices of goods and services, rose 0.2% during the month, bringing the inflation rate over the last 12 months to 2.9%.
These figures were largely in line with the predictions of economists surveyed by Dow Jones, who had forecast a monthly increase of 0.2 percent and an annual rate of 3 percent.
The core CPI, which excludes volatile food and energy prices, also came in line with expectations, with a monthly increase of 0.2 percent and an annual rate of 3.2 percent.
These data suggest that inflationary pressures are stabilizing, which could potentially pave the way for the Federal Reserve to consider easing its monetary policy.
The implications of these inflation figures extend beyond traditional financial markets, and cryptocurrency experts are paying close attention to the potential fallout. Many see the current economic climate as increasingly favorable for digital assets, particularly Bitcoin.
Why it matters for crypto: Matt HouganCIO at Bitwise Invest Benzinga said the market needed a boring number from today’s CPI, and that’s exactly what it got.
“We needed something that wouldn’t stop the Fed from cutting rates in September or disrupt talks at the upcoming Jackson Hole summit. And that’s exactly what this report was: a boring, beautiful yawner,” he said.
He further elaborated on the broader implications for the cryptocurrency market, saying: “I see some people focusing too much on whether we get a 50 or 25 basis point cut this fall. That doesn’t really matter. What matters is the regime change. We are leaving a period of prolonged rate hikes and entering a season of rate cuts. That is bullish for Bitcoin BTC/USD.”
Also read: Circle CEO Jeremy Allaire: “Crypto has been a bipartisan issue for quite some time”
Other industry experts share this view.
Eliezer NdingaVP and Head of Strategy and Business Development at 21Sharesemphasized the importance of the current economic environment for digital assets:
“The recent inflation data showing a cooling but stable inflation environment is crucial for the crypto market, especially after last week’s overall market downturn. With inflation coming in as expected, the likelihood of a smaller 25 basis point rate cut by the Fed has increased, which could support risky assets,” said Ndinga.
As the cryptocurrency market matures, its relationship with traditional financial indicators becomes increasingly clear.
White WolfSenior Analyst at K33 Researchhighlighted this growing connection:
“The 30-day correlations between Bitcoin and the S&P 500 are approaching yearly highs following last week’s surge in global liquidity. With market participants deleveraging and little immediate short-term development, we expect economic data to have a stronger impact on the market in the coming weeks.”
Bitcoin did not immediately benefit from the inflation data, falling 3.3% to $59,200 at the time of writing. However, all eyes are now on the Federal Reserve’s next moves, with many experts predicting a rate cut that could provide a boost to the broader financial markets.
What’s next: The implications of this data will likely be a key topic of discussion at the upcoming Benzanga Future of Digital Assets event on November 19, where industry leaders will examine the intersection between macroeconomic trends and the evolving crypto landscape.
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