The Bitcoin market is facing another downturn after a brief moment of recovery last week, albeit not as severe. If you’ve been following the trends, you might have noticed that the markets aren’t in the best shape right now. What’s causing this renewed dip? It looks like all eyes are on the economic data coming out of the United States this week, which could have a big impact on both stocks and Bitcoin.
What’s Going On in the Markets?
You might have heard about the financial markets taking a hit last week. There was a lot of nervousness due to increased volatility, especially around something called the Japanese carry trade. This chaos created a ripple effect that led to a sharp drop in the global markets, with a massive crash happening last Monday. This week, the focus shifts to the United States, where a series of important economic reports are about to be released.
One of the key reports we’re looking at is the Producer Price Index (PPI), which gives us an idea of the prices producers are charging. This report is coming out tomorrow, and it’s expected to provide the first clue about inflation pressures. Why does this matter? Because inflation data plays an important role in how the Federal Reserve decides to adjust interest rates, which can affect everything from stocks to cryptocurrencies.
Key Events This Week:
1. July PPI Inflation data – Tuesday
2. July CPI Inflation data – Wednesday
3. July Retail Sales data – Thursday
4. Philly Fed Manufacturing Index – Thursday
5. July Housing Starts data – Friday
6. 3 Fed speaker events and earnings season continues
We…
— The Kobeissi Letter (@KobeissiLetter) August 11, 2024
What to Expect from the Inflation Reports
The PPI report is just the beginning. The bigger piece of the puzzle is the Consumer Price Index (CPI), which will be published on Wednesday. The CPI gives us a look at inflation from the consumer’s perspective. Analysts are predicting a year-on-year increase of 3 percent, with a slight bump in monthly inflation compared to June.
A senior economist at Wells Fargo, has mentioned that these numbers might show that inflation pressures are easing up, but we’re still not at the Federal Reserve’s target of 2 percent inflation. This target is crucial because the Fed needs to see inflation under control before they feel comfortable making any major policy changes.
How Will This Impact Bitcoin?
Here’s where things get tricky. Even though the expected inflation numbers don’t seem too alarming, the market right now is very sensitive to any news—especially when there isn’t much positive news to go around.
We’ve already seen a 3.5 percent drop in the total market value at the start of this week, bringing the crypto market’s total value down to $2.14 trillion. Bitcoin took a hard hit, falling 5% percent in just 24 hours to below $58,000, and the second largest crypto asset, Ethereum, wasn’t far behind with a 4 percent drop. Bitcoin has recovered somewhat since, and is now trading at $59,543, according to CoinMarketCap. Nevertheless, the overall mood remains cautious.
Adding to the uncertainty is the expectation that the Federal Reserve might not cut interest rates as much as people were hoping. Michael Gapen from Bank of America pointed out that if the economic data aligns with expectations, the market might adjust to expect fewer rate cuts. This could lower the chances of seeing a big rate cut in September, which the market had been counting on.
What Should We Keep an Eye On?
As we move through the week, it’ll be important to watch how the market reacts to these economic reports. The PPI and CPI numbers will likely set the tone, not just for crypto but for the broader financial markets as well. If you’re holding onto Bitcoin, be prepared for a potentially bumpy ride. The data coming out this week could either calm some of the current fears or add more fuel to the fire.
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