As a seasoned crypto investor with a knack for navigating market trends and understanding economic data, I find myself both intrigued and cautiously optimistic after this latest round of CPI and jobs reports. The slight retreat in Bitcoin and other cryptos, coupled with a similar movement in the stock market, is reminiscent of a chess game where each piece seems to be dancing in response to the moves of the king (in this case, the CPI data).
As an analyst, I observed a slight pullback in both cryptocurrency values and stock market indices following the release of optimistic Consumer Price Index figures from the United States.
Uniswap, ICP, AAVE rise, Bitcoin retreats
The price of Bitcoin (BTC) dropped to around $56,600, causing the total value of all cryptocurrencies to decline to approximately $2 trillion. Similarly, in the stock market, the Dow Jones, Nasdaq 100, and S&P 500 index futures experienced a decrease of more than 0.50%.
After the release of the CPI data, many cryptocurrencies experienced a decline. However, some coins, such as Internet Computer (ICP), AAVE (AAVE), Uniswap (UNI), and THORChain (RUNE), bucked the trend and increased by more than 2%.
As reported by the Bureau of Labor Statistics, the Consumer Price Index (CPI) decreased for the fourth month in a row and now stands at 2.5%. This is its lowest point since the year 2021. On a monthly comparison, the CPI remained stable at a 0.2% increase.
Without factoring in food and energy costs, the main Consumer Price Index (CPI) increased from a rate of 0.2% to 0.3%, exceeding the forecasted 0.2% rise. However, it stayed constant at 3.2% when measured over a year.
The U.S. Consumer Price Index (CPI) report aligns with expected projections, but there’s a significant difference: the monthly core inflation rate is higher than anticipated at 0.3%, compared to the forecasted 0.2%. Due to the strong reliance on specific data points in the financial market, the initial response from assets is typically increased interest rates and a potential decrease in stock prices.
— Mohamed A. El-Erian (@elerianm) September 11, 2024
A few days following the release of conflicting employment figures by the bureau, it was reported that the economy added approximately 112,000 jobs in August and maintained an unemployment rate over 4.0%.
Fed is set to cut rates next week
Bitcoin, various cryptocurrencies, and stocks showed only slight responses to the recently released U.S. Consumer Price Index (CPI) data, suggesting it may not greatly influence the Federal Reserve’s decision during its upcoming meeting next week. According to the CME Fed Watch tool, approximately 85% of investors anticipate the Fed will implement a quarter-point interest rate reduction, which would adjust the official cash rate to between 5.25% and 5.50%.
In essence, theoretical reasoning suggests that high-risk investments such as Bitcoin could potentially thrive when the Federal Reserve reduces interest rates, because a significant amount of money tends to flow from money market funds during this period. As a result, when government bond yields decrease, some investors might decide to shift their portfolios towards these riskier assets.
Instead, it’s important to note that the planned rotation might require some patience, given that Fed rate cuts are anticipated to be slow and steady. This means fixed income investments could continue to provide appealing returns in the near future.
The potential victory of Kamala Harris in the upcoming general election, following her strong performance in the debate, may have contributed to the recent decline in Bitcoin and other digital currencies. According to Polymarket data, Harris has overtaken Donald Trump, who had previously held the lead, but it’s important to note that the race remains close as suggested by polls.
The value of Uniswap’s token increased due to a surge in transaction activity on its Decentralized Exchange (DEX) platform. According to DeFi Llama, this weekly volume experienced an increase of more than 33%, reaching over $6 billion. In contrast, AAVE witnessed a rise as large investors continued to amass the token.
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2024-09-11 17:16