The hotter-than-expected Producer Price Index (PPI) has not heightened inflation concerns, stimulating hopes that the Federal Reserve (Fed) will cut interest rates in September.
The latest PPI data shows slight inflationary pressure, causing significant volatility in the cryptocurrency market, but also increasing the likelihood that the Fed may cut interest rates by 25 basis points in the next meeting.
MAIN CONTENT
Rising PPI raises concerns about next month's CPI and its influence on the Fed's interest rate decision.
The cryptocurrency market faces liquidation pressure exceeding $1 billion, primarily from traders holding long positions.
Positive signals for the Fed's potential interest rate cuts help drive the bullish trend in the cryptocurrency market.
How does the cryptocurrency market respond to inflationary pressure?
The PPI data from Thursday highlights the potential for a high CPI next month, causing investor concerns that the Fed will maintain interest rates at 4.5%. This leads to strong liquidations in the cryptocurrency market, especially in long positions.
According to statistics from CoinGlass, the cryptocurrency market has experienced liquidations exceeding $1 billion in a day, with traders holding long positions losing over $827 million. This pressure reflects a cautious sentiment regarding upcoming monetary policies.
"Hardly any inflation at all. 401(k) s and the stock are soaring."
Donald Trump, former President of the United States, 23/6/2023
Overall, despite data exerting pressure, there are positive signs from exchanges pricing in a likelihood of the Fed cutting interest rates by 25 basis points up to 81%. Notably, the chance of a 50 basis point cut increases to 11%, surpassing the no-cut rate (10%) for the first time.
What will the next developments of the cryptocurrency bull market be?
The cryptocurrency growth market has just entered a phase of euphoria, especially after the price recovery of Ethereum and Bitcoin. The bullish wave is bolstered by increasing interest from institutional investors with investment strategies in cryptocurrency treasury funds.
Furthermore, the signing of an executive order allowing 401(k) pension funds, with over $8 trillion in assets under management, to diversify investments into cryptocurrency has opened sustainable opportunities for this market.
The expansion of investment in cryptocurrency from pension funds is a strong sign of widespread acceptance and the sustainable growth potential of the industry.
Financial market analyst, 2023
What factors have the greatest impact on the Fed's direction in the upcoming meeting?
The latest PPI data and CPI forecasts are key indicators for the Fed to evaluate its next move. Rising inflationary pressure may cause the Fed to carefully consider interest rate cuts, while the desire to support financial markets and the economy still fuels expectations for a slight rate reduction.
Analysis of data from Kalshi shows that the probability of a 25 basis point rate cut is highly valued by investors, while the rate of a 50 basis point cut has also increased slightly, reflecting a shift in market expectations for a more flexible monetary policy.
Frequently asked questions about inflation's impact and the cryptocurrency market
How does inflation affect the cryptocurrency market?
High inflation often brings about significant volatility, causing liquidation pressure and increasing risk but also opens up investment opportunities based on monetary policy developments.
Why might the Fed cut interest rates amid rising inflation?
The Fed considers overall economic factors, including growth and financial markets, to adjust interest rates in order to balance between controlling inflation and promoting growth.
What does allowing 401(k) to invest in cryptocurrency mean?
This encourages institutional investor participation, increases liquidity, and reinforces confidence in the long-term potential of cryptocurrency.
Is liquidation in the cryptocurrency market common?
Large liquidations often occur in response to significant market-moving information or changes in monetary policy, making this a part of the market cycle.
What should individual investors pay attention to when the market is highly volatile?
Tight risk management and close monitoring of macroeconomic conditions are essential to avoid severe losses.
Source: https://tintucbitcoin.com/donald-trump-bac-lo-ngai-lam-phat-tien-so/
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