The cryptocurrency market is trading in the green during today’s session as it sees some relief from macroeconomic factors. Today the US published its Consumer Price Index for July which hinted at slowing inflation and allowing Bitcoin, Ethereum and others to experience some relief.
The CPI has been a key barometer over the past months as the US Federal Reserve tries to mitigate it by raising interest rates and reducing its balance sheet. Consequently, global markets experienced less liquidity which negatively impacted risky assets, such as stocks and cryptocurrencies.
At the time of writing, Bitcoin (BTC) is trading at $23,900 with a profit of 4% in the last 24 hours while Ethereum (ETH) is trading at $1,800 with a profit of 9% over the same period. The second crypto continues to outperform BTC as it appears that investors are migrating into the altcoin sector.
The July CPI reading is seeing a drop on the back of commodities trending downward, particularly the energy sector which has seen a drop in prices. However, Rick Reader, chief information officer at investment firm BlackRock, believes that inflation “is still going at an alarmingly high rate.”
This may continue to act as a headwind for digital and risky assets in the long term, but it could allow the Federal Reserve to be less aggressive in its monetary policy. Reader He said Below is the possible long-term bullish impact of lower inflation:
Over time, we believe that the slowdown in economic growth, the continuation of the Fed’s aggressive hike cycle and the possibility of resolving many of the ongoing supply chain issues, should affect broad inflation to a lower level.
Reader claims that inflation may continue to be on a downward or moderate trend in the coming months. This may remove the uncertainty in the cryptocurrency market and provide sufficient support for these assets to regain previous highs.
Could Bitcoin and Crypto Expand Bullish Momentum?
BlackRock’s chief information officer said the biggest headwind for cryptocurrency will be the Federal Reserve’s Federal Open Market Committee (FOMC). At that time, the financial institution may announce another “significant” rate hike, but “there is still a lot of data to come between now and the meeting.”
In this environment, data from crypto research firm Santiment records Rise in supply of Tether (USDT) on exchanges. This indicates potential buying pressure from market participants who are waiting for more clarity on macroeconomic factors.
The latest CPI reading may provide this clarity, as at the time of writing, USDT supply on exchanges is at 42% for the first time since April 2022. At that time, the market was about to go into a massive bull run at all-new highs.