Bitcoin and Crypto Market Drop After CPI Report on Inflation
The latest U.S. Consumer Price Index (CPI) report on September inflation has caused Bitcoin and the rest of the crypto market to decline. The CPI measures the rate of price changes for consumer products and revealed that prices for goods and services exceeded estimates, although underlying inflation is slowing down. According to the Bureau of Labor Statistics (BLS), the CPI increased by 0.4% last month, in contrast to August’s report which showed a 0.6% increase, the largest in 14 months.
In the year leading up to September, the CPI rose by 3.7%, while year-on-year consumer prices have decreased from a peak of 9.1% in June 2022. At present, Bitcoin is trading at $26,812, reflecting a 1.3% drop in the past 24 hours and a 3.3% decrease over the past week. Ethereum, the second largest cryptocurrency by market cap, has also experienced a 1.5% drop in the past day and is currently valued at $1,549.
Expert Opinions on Inflation and Crypto Market Volatility
Swan Bitcoin’s head of private client services, John Haar, stated that investors had already priced in expectations that inflation would remain somewhat stable. He added that due to recent moves in Treasury yields and comments from Fed officials, it seems likely that interest rates will remain unchanged at the next meeting on November 1.
James Butterfill, CoinShares’ head of research, noted that rising airline fares and oil prices may have an impact on core inflation. Dessislava Aubert, an analyst at Kaiko, mentioned that low liquidity and volumes contribute to increased volatility in the crypto markets. However, she also stated that the impact of a slightly higher CPI number would be less significant now that the market perceives the U.S. central bank as less likely to raise rates due to the surge in long-term bond yields.
Changing Perception of Bitcoin as a Safe-Haven Asset
Historically, investors have sold “risk assets” like Bitcoin during periods of high inflation when the Fed raises interest rates to control it. However, there is a shifting perception among some investors who now view Bitcoin as a safe-haven asset similar to gold. Experts also suggest that CPI figures are becoming less relevant for the crypto market as the worst of inflation is believed to be behind us. The expectation among experts is that the Fed will not raise interest rates next month.
Hot Take: The Impact of CPI Report on Crypto Market
The latest CPI report on inflation has had a negative effect on Bitcoin and the broader crypto market, causing prices to drop. This decline can be attributed to concerns over inflation and the potential actions of the Federal Reserve. However, some experts argue that Bitcoin’s status as a safe-haven asset and changing perceptions of its role in times of inflation may mitigate the impact. As we move forward, CPI figures may become less influential in shaping crypto market trends, with other factors taking precedence.
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