Crypto Crashes as US Inflation Worse Than Expected

The consumer price index in the United States has just been published. The CPI indicates a change of 8.3% year-on-year and 0.1% month-on-month. These are not the numbers the crypto market was hoping for. The estimated CPI was expected at 8.1% YoY and -0.1% YoY. A bad CPI is not good news for the cryptocurrency market.

Following the CPI data, Bitcoin and Ethereum prices are falling. Both BTC and ETH fell nearly 6% within minutes. Core CPI figures are also worse than expected. Core CPI shows a 6.3% year-on-year increase, instead of the expected 6.1%.

Why is CPI data important for cryptocurrencies?

The consumer price index is an important measure of inflation. The Federal Reserve takes this data into account when deciding its monetary policy. The Fed is taking an aggressive bellicose stance to reduce inflation levels. Fed Chairman Jerome Powell has promised to hurt households and businesses when the Fed rein ins inflation.

Favorable CPI data could have helped moderate the Fed’s attitude. However, due to worse than expected data, the Fed will most likely continue to adopt an aggressive stance. The CME Fed Watch tool reveals that the Fed will almost certainly raise interest rates by 75 basis points. High interest rates due to the CPI are not good news for the cryptocurrency market. A bigger than usual interest rate hike in June led to a crypto bloodbath.

More importantly, there will likely be no reprieve for the markets after September. Treasury Secretary Janet Yellen believes inflation prices will rise in winter due to a gas shortage in Europe. Additionally, Cleveland Fed President Loretta Mester revealed that multiple interest rate hikes are likely.

Can Merger Save the Crypto?

The Ethereum meltdown is an extremely bullish event for crypto. Investors are hoping for a successful merger, as it may help rally the plummeting price. However, many cryptocurrency traders are betting against a successful merger.

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