The cryptocurrency market may finally experience a shakeout following the upcoming release of CPI and PPI data later this week. Chairman Powell will also deliver his semi-annual monetary policy testimony to the HFSC. With a potential 25 basis point rate cut ahead, circumstances could change very quickly.
A more forceful stance on interest rates by the Fed in reaction to higher-than-expected inflation could affect all financial markets, including cryptocurrencies. Conversely, if inflation appears to be under control, markets could experience some respite and the price of digital assets could rise. Chairman Powell’s testimony is also a relevant event because it provides insight into the Fed’s outlook for the economy and its plans for future monetary policy.
Increased volatility in the cryptocurrency market may arise from any hints of changes in monetary policy or the outlook for the economy. Investors and traders will be closely watching for any clues on interest rates and the Federal Reserve’s strategy to fight inflation. A potential 25 basis point rate cut creates additional uncertainty.
It could point to the Fed’s intention to stimulate economic development if implemented, which could have a positive effect on risk assets such as cryptocurrencies. However, the market’s primary response will be determined by how these developments fit into current economic conditions and forecasts.
The cryptocurrency market is going through a turbulent time. With resistance at the 200 EMA level, Bitcoin has had a hard time holding its ground above $58,000. Ethereum, meanwhile, is struggling to maintain its upside momentum and is currently trading below the $3,000 mark. Major market forces, such as massive liquidations and selling pressure from different entities, including government agencies and ETF holders, are worsening these technical difficulties.
