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The last two weeks have been exhausting for cryptocurrency traders, with significant developments on the macroeconomic front. Bitcoin price has fallen due to reduced liquidity and FUD, but has maintained the $27,500 level. The data that has just come in will significantly shape expectations for the rest of the month.
US Producer Inflation
Inflation is the Fed’s top priority and it continues to fall steadily. This shows that the interest rate policy is paying off. Yesterday’s inflation data pushed interest rates above current inflation and raised expectations that the Fed may not hike further. However, the decline in consumer inflation needs to continue.
In order for the CPI data to continue to decline, the steady downward movement in the producer price index must also continue. Since the just-arrived data was a leading indicator for CPI, it was closely followed by Bitcoin, gold, crypto, silver investors.
The data was announced as follows;
– PPI (Monthly) Announced: (Expectation: 0.3% Previous: -0.5%)
– Core PPI (Annual) Announced: (Expected: 3.3% Previous: 3.4%)
– Applications for Unemployment Benefits Announced: (Expectation: 245K Previous: 242K)
Annual PPI was announced as 2.3%. The data, which came below expectations, was also below the 2.7% announced in the previous month. All three data were positive for Bitcoin. Unemployment is rising, and the Fed’s 4% annual target seems to be realized in the second half.
What About Cryptocurrencies
Data reflecting the current state of US inflation was positive for cryptocurrencies. Inflation will continue to fall and interest rate hikes are paying off. On the other hand, market pressure has increased due to credit tightening. Taking this into account, the Fed may decide not to raise interest rates in June. This could further accelerate the rise in cryptocurrencies.
Speaking this week, FOMC member Williams said that they have not yet reached the end of rate hikes, but the Fed is about to announce the ceiling. FedWatch data confirms this. If we do not face major problems on a global scale, we can say that we have come to the end of the rate hike process that started about a year ago.
We expect that the Fed has triggered recessions many times when starting to cut rates. Now Powell and his team will have to think more about softness. The way to do this is to stop interest rate hikes before it is too late.
Bitcoin price is at $27,500 at the time of writing.
