On the eve of a busy week for cryptocurrencies, incoming data is expected to escalate market volatility. Following ETF applications, Bitcoin‘s price quickly escalated. Although BlackRock’s support has pulled the price up by thousands of dollars, it hasn’t been sufficient for more. So what does the upcoming week hold?
Will Cryptocurrencies Increase?
The eagerly awaited US inflation data will be announced at 15:30 on Wednesday, July 12. A continued decrease is expected due to the base effect. This could also mean a temporary opportunity for cryptocurrencies to surge. However, markets might not price in this positivity as employment and wage increases did not meet expectations. The unpredictability of crypto creates uncertainty until the response to the low inflation data is seen.
Powell had stated that a 25bp interest rate increase could come for the meeting in July. We’ll see more concrete signals regarding the last 2 planned interest rate increases for the rest of the year in the coming days. Fed members will make statements almost every day, and we have seen negative pressure dominating cryptocurrencies during similar weeks in the past.
In summary, while an increase is expected due to the inflation data next week, we may be pressured due to the possibility of a hawkish stance by Fed members.
The average expectations for July 12 are as follows;
- 15:30 US Core Inflation (Monthly Expectation: 0.3% Previous: 0.4%) (Annual Expectation: %5, Previous: %5.3)
- 15:30 US Inflation (Expectation: 3.1% Previous: %4)
Will US Inflation Decrease?
According to a report penned by WSJ in a short time, inflation will also decrease on July 12. A very optimistic picture is being drawn. If we see a new development on the ETF front, it could create the expected environment for crypto. WSJ indirectly announced the good news for crypto. The report stated;
“The U.S. Labor Department is expected to announce that general inflation has fallen to the lowest level in the last two years, at 3%. When volatile food and energy prices are excluded, core consumer price inflation is expected to fall from 5.3% to around 5%, the lowest level in 18 months. Economists think core inflation could fall further to between 3.5% and 4% in the coming months.”
The housing and used car sectors are expected to help pull down the core index, but unless the economy weakens, the expected result cannot be achieved. The important data here that the Fed is watching is the monthly core increase along with employment, wages data. If wages do not come in much below expectations, the sticky inflation issue could push the Fed to keep interest rates higher for longer than expected. If we consider the possibility of SEC lawsuits becoming painful, the last quarter could be challenging especially for altcoins.
Investors should expect significant drops in wage increases and non-farm employment and the unemployment rate exceeding 4%. If these do not happen, risk markets may be pressured more in the macro front.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware of the high volatility and thus risk of cryptocurrencies, and should carry out transactions in line with their own research.
