Bitcoin and cryptocurrency prices have crashed this year in the face of the Federal Reserve’s “brutal” interest rate hikes as it battles against soaring inflation.
The bitcoin price has plunged under $20,000 per bitcoin. This is down from almost $70,000 late last year.
Meanwhile, ethereum and other top ten cryptocurrencies BNBBNB, XRPXRP, solana, cardano and dogecoin have also crashed. This is happening despite some game-changing developments such as ‘The Merge‘.
The Reality Of The Cryptocurrency Market
Currently, following a stronger-than-expected U.S. jobs report this week, things are shaky. The report sent the bitcoin price sharply lower.
Consequently, all eyes have turned to the latest consumer price index (CPI) report, due on Thursday. Some think it will “decide the fate of this market.”
“CPI next week will decide the fate of this market,” one influential trading analyst posted to Twitter. He did this after data showed U.S. employers added 263,000 jobs in September. This was down from 315,000 in August but higher than an anticipated 255,000.
“With this jobs report it seems clear we are on course for another significant hike from the Fed. I say this considering the market pricing in a 75 [basis point] rise in interest rates at its next meeting.” The above statement was by Paul Craig, portfolio manager at Quilter Investors, told Coindesk.
Consumer Price Index
September CPI is predicted to have slowed slightly from the month before, forecast to drop to 8.1% year-on-year. A larger-than-expected slow down in price rises could mean the Fed eases up on its program of interest rate hikes.
The last U.S. CPI reading of 8.3% showed prices were still climbing. Prices climbed despite the Fed embarking on a series of historic interest rate hikes this year. This led to torpedoing stock markets and cryptocurrency prices.
“Worries are firing in from all fronts following the latest robust snapshot on the U.S. labour market.” The above comment was by Susannah Streeter, senior investment and markets analyst at brokerage Hargreaves Lansdown.
“Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy. However, also that the better than expected data shows that the jobs market hasn’t slowed enough to stop the Fed. Especially from hiking rates aggressively.”
Cryptocurrency Losses So Far
The bitcoin and crypto market, after touching $3 trillion last year, has lost a staggering $2 trillion. This happened in under 12 months in what’s been branded the latest crypto winter.
The crypto market has previously spun on cycles of boom and bust with the last crypto winter lasting through 2018 until late 2020.
This week, one crypto founder predicted how long this latest crypto winter could last.
“We will need to see some consistent economic slowing figures before the Fed-pivot trade is realistically in play.” The above statement by William Marsters, senior sales trader at Saxo, said in an emailed note. “CPI numbers and FOMC minutes are out next week which will continue to build the picture for the outlook.”
Expectations had built this week. Expectations that the Federal Reserve could be about to swing dovish in its flight against inflation. Especially with one closely-watched analyst predicting the price of bitcoin, it could be about to “outperform most major assets.”
However, Minneapolis Fed president Neel Kashkari said this week that the central bank has “more work to do.”
“Until I see some evidence that underlying inflation has solidly peaked. Until there are signs of it heading back down, I’m not ready to declare a pause,” Kashkari said.