Bitcoin (BTC) and the larger cryptocurrency market have been operating in an environment facing substantial inflation for the past few months. However, Cryptocurrencies have also gone through the impact of macro events, which could determine their future price course due to the virtual currencies’ strong connection to the stock market.
This month, three scheduled macroeconomic events may command the direction crypto prices and markets will take.
CPI Inflation Release May Be Severe for the Market
Since its inception, Bitcoin investors have staked that the largest crypto by market capitalization could be used as a reliable inflation hedge. They will keep an eye on the Wednesday’s, July 13 release of the Consumer Price Index (CPI) data for June by the U.S. Labor Department.
The closely watched CPI (Consumer Price Index) is set to be released at 8:30 a.m. E.T. (13:30 a.m. UTC), which is anticipated to indicate an increase in inflation from the previous month, which is already at its highest level in 40 years.
The Federal Reserve may forcefully tighten monetary policy over the coming months if inflation rises faster than anticipated. As a result, risky assets like equities, Bitcoin (BTC), and other cryptocurrencies may see more negative pressure.
July 26-27: Fed May Increase Interest Rates
Following the Federal Open Market Committee (FOMC) meeting later this month, interest rates are anticipated to rise further after reaching 75 basis points in June, one of the most significant monthly hikes in 28 years.
One of the main strategies the Federal Reserve and the U.S. Central Bank employ to control inflation is to slow the economy. Increasing borrowing costs due to rising interest rates can limit consumer and company financing and consumption.
Additionally, because investors might start to get respectable returns just by keeping their money in interest-bearing accounts or low-risk assets, it may put downward pressure on the pricing of higher-risk assets like cryptocurrency. The FOMC is anticipated to decide whether to impose a 50 or 75 basis point increase this July.
July 28: Are We in an Economic Downturn?
The U.S. Bureau of Economic Analysis (BEA) will publish an early forecast of the country’s GDP for the second quarter of 2022 on July 28.
The GDPNow tracker of the Atlanta Federal Reserve currently predicts a -2.1 percent fall in GDP growth for Q2 2022 after recording a -1.6 percent GDP decline in Q1 2022.
The United States would enter a “technical recession” after two quarters in a row of GDP decrease. It is anticipated that the U.S. economy will enter a recession in 2023, at which point Bitcoin will experience its first-ever full-blown downturn and will likely continue to fall along with tech stocks.
Is It All Doom?
The recent crypto market fall, which was macro-catalyzed, is seen by some of the top commentators in the business as a generally good indication for the sector, despite the pessimistic macro projections. Some investors are optimistic prices will increase.
The current cryptocurrency fall, according to crypto specialist Erik Voorhees, co-founder of Coinapult and CEO and creator of ShapeShift, is “least worrying” to him since it is the first time a crypto crash has been caused by macro causes unrelated to crypto.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any service.
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