Last week brought hope and confidence to many crypto participants. This is due to the rising prices of major cryptocurrency tokens. But when prices twist the other way around, happy days suddenly seem to get shorter.
Over the past 24 hours, the cryptocurrency market has been in turmoil and tension as prices have fallen. Some cryptocurrency experts worry that rising inflation could lead to another bear market. Most of the major crypto-assets have experienced a downturn after gaining significantly in last week’s space.
Bitcoin price fell below $23,000 again. After climbing to $24,500, it is currently trading at around $23,0760. Ethereum price rose from his $1,764 to $1,570, so it couldn’t be any better. However, he has now risen slightly to $1,688. There are also price drops for Ethereum Classic and Cronos.
In an interview with CNBC, Adam Parker, founder and CEO of Trivariate, pointed out that CPI is contributing to the current situation. Parker said the CPI is likely to remain in a high position.
According to Parker, he is still unaware of any intent to help from the Fed. He also observed that housing market rents are rising by up to 12% annually.
CPI Plays A Key Role In Crypto Market Trends
The Consumer Price Index (CPI) is a key indicator used by the Fed to measure inflation. However, some experts are less confident in the index due to its lagging nature.For them, it will be quite some time before the CPI eases. Typically, both the cryptocurrency market and the stock market need a CPI below 2 to see significant price increases. However, this can only happen in a major recession.
Other experts have a different opinion regarding pending events. Morgan Stanley’s Chris Toomey says inflation hasn’t peaked yet. According to him, global GPD is creating more concerns. So the current inflation is becoming structural rather than temporary.
The impact of rising inflation can be very dramatic on cryptocurrency prices. The Federal Reserve has tried to control its influence using interest rate hikes and quantitative tightening. Crypto went havoc in June as the Fed hiked his rate by 75 bps.
The cryptocurrency market did not show a significant drop as July’s CPI showed rising inflation. Some experts explained that the market had previously seen interest rates rise following bad CPI data.
Some players expect a positive turnaround in CPI values in August with a course reversal from the Fed. If conditions are to the contrary, the cryptocurrency market may enter a bearish trend.
Featured image from FX Empire, Chart from TradingView.com