Cryptocurrency market is all eyes on the US inflation data to be announced today. The upcoming inflation data is deemed important due to its potential to impact Bitcoin (BTC) and altcoins.
Countdown for Critical US Inflation Data Begins
Global markets, including the crypto market, are closely following the US inflation data to be announced today at 15:30. The importance of these data points is magnified as they are the last inflation figures before the Federal Reserve’s July meeting.
While it is expected that the headline inflation of the US economy has dropped to 3.1%, the lowest level in two years, in June, the core inflation, calculated excluding volatile food and energy prices, is expected to drop from 5.3% to the lowest level of the last 18 months, 5%. Analysts predict that depending on the price index, core inflation could further decrease to between 3.5% and 4% in the coming months.
Bitcoin and Altcoins in 5 Scenarios Presented by JPMorgan
Banking giant JPMorgan’s analysts presented five scenarios on how the market could react to the data depending on the monthly increase in the CPI compared to the previous year. According to analysts, the best scenario would be inflation coming in at 2.7% or lower, which could take off the table the possibility of an interest rate hike at the Federal Reserve’s July meeting, and even create the possibility of a rate cut in the fourth quarter. Sharp rises could be seen in the cryptocurrency market in this best-case scenario.
In the second scenario presented by the analysts, where inflation is between 2.8% and 2.9%, it is expected that expectations for a July rate hike will continue and the Federal Reserve may consider that the interest rate hike process has come to an end if these expectations fall below 45%. In this favorable scenario, the likelihood of a rise in BTC and altcoins outweighs.
In the third scenario, if inflation comes in between 3% and 3.2%, it would continue to support the narrative that inflation is falling. A 25 basis point interest rate hike by the Fed in July could be sufficient to remove the expectation of further interest rate hikes for the rest of the year. In this scenario, Bitcoin and altcoins could start pricing in the end of the Fed’s cycle and see increases.
In the fourth scenario put forward by the analysts, where inflation comes in between 3.3% and 3.6%, it wouldn’t alleviate concerns that the Fed will soon end its rate hike process. Considering the expected increase in energy prices and still strong consumer spending, this scenario may bring negative comments. Pullbacks could be seen in Bitcoin and altcoins in this scenario.
In the last and worst-case scenario, inflation is expected to be 3.7% or higher. In this scenario, concerns about the Federal Reserve may increase, and there is a possibility that a 50 basis point interest rate hike could even begin to be priced in at the July meeting. This could lead to sharp pullbacks in high-risk assets such as Bitcoin and altcoins.
