Cryptocurrency markets drop to two-year low after disappointing inflation report

Cryptocurrency markets drop to two-year low after disappointing inflation report

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Cryptocurrency markets fell Thursday morning in anticipation of new federal data, which revealed that consumer prices have risen 8.2% in the past 12 months โ€” a continuation of the cryptocurrency’s slide as investors fear rising inflation and a new round of potential interest rate hikes could push the economy into recession and Scary “Crypto Winter”.

key facts

Bitcoin, considered the “gold standard” in the cryptocurrency market, fell by 3.91% on Thursday, to $18,404, continuing its steady decline from a peak of $63,599 last November and its lowest level since December 2020.

The second-largest cryptocurrency, Ethereum, also fell 6.53% to $1,221.40 in the wake of Labor Department data, which also showed overall prices rose 0.4% over the past month, compared to economists’ expectations of 0.3%.

Meanwhile, Elon Musk’s favorite Dogecoin fell 5.62% to $0.057.

The drop comes one month after Bitcoin plunged 9.35% to $2,034 – its biggest drop since June – following the Labor Department’s August inflation report, which showed an 8.3% rise in consumer prices over 12 months.

Craig Erlam, chief market analyst at OANDA, said the crypto decline is part of the recent slide, even as other โ€œrisk assetsโ€ including technology stocks have risen, although Michael Wilson, strategist at Morgan Stanley, said These gains may not last long in the economy. Uncertainty from the ongoing Russian war in Ukraine and economic volatility weakening the dollar.

main background

Low interest rates and the check of stimulus in the Covid era helped drive bitcoin’s rally in 2020 and 2021, to its peak last November. However, recent inflation reports and three rounds of Fed rate hikes in the summer and fall have made investing riskier, accelerating the cryptocurrency’s decline. In an interview with CNBC Monday, JPMorgan Chase CEO Jamie Dimon warned of higher interest rates combined with the lack of energy supplies from the Russian invasion of Ukraine, “very serious things” that would likely put the United States into a kind of recession. The next six to nine months. These were bad signs for bitcoin, which plunged below $20,000 on August 27 following inflation data from the Department of Labor. It was the biggest drop since June, when it fell from $28,636 to $20,556.

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What we don’t know

How will the Fed continue to tackle inflation, and if that means a fourth rate hike. The most recent one raised rates last month another 0.75 percentage point โ€” an attempt to lower inflation by making borrowing more expensive and easing demand, although economists are torn about the effects another rate hike could have on the economy, with some worried it could push it back. into an economic recession.

in-depth reading

Inflation rose worse than expected by 8.2% in September (Forbes)

‘Extremely dangerous’ – JPMorgan CEO issues stark warning of ‘panic’ that could affect price of Bitcoin, Ethereum and crypto (Forbes)

Bitcoin Becomes Less Volatile Than Stocks Raise Warning Flag (Bloomberg)

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