Armageddon in crypto market as inflation fears worsen

The unexpected increase in the inflation figure has caused crypto the crypto market to go into free fall. Since the CPI data for May was released, bitcoin has lost the strong support at $29,000 and has fallen to $24,000, a 17% reduction. The rest of the crypto market has fared far worse.

The consumer price index (CPI) came in at 8.6% on Friday, surprising many market analysts who believed that the April figure of 8.3% would hold, or would even be likely to reduce to 8.2%.

This month’s inflation figure is the highest in four decades and it’s probably for this reason that crypto has been so hard hit. The Fed would have probably been hoping for inflation to start levelling off so it could begin to rein in the interest rate hikes.

However, now that inflation has shown that it isn’t beaten, and that it is still not under control, it may be that the Federal Reserve has to raise 75 basis points each FOMC meeting rather than the 50 basis points that were envisaged.

An article on Yahoo News paints a more positive picture. Here, Jonathan Silver, CEO of Affinity Solutions, a company that tracks consumer purchasing habits, suggests that the inflation trend is about to reverse.

“There are certainly positive signs that would indicate the worst [on inflation] is behind us,”

He adds:

“The job market remains strong, which is putting money in people’s pockets. However, price increases are still outpacing people’s paychecks. Hopefully, this trend will reverse itself as inflation reaches its peak and begins to dissipate. Our purchase spending data suggests that this is the direction we are headed,”

The Fear and Greed Index looks to have hit a bottom perhaps. The current data is showing the most persistent fear figures since data began to be recorded in February 2018. The index has been recording levels of between 17 to as low as 8 since May 9.

According to an article on Bloomberg, confidence is at an all-time low following the Terra Luna collapse, and the fact that Celsius paused withdrawals on its platform earlier today.

In the article, Antoni Trenchev, co-founder of Nexo, summed up the situation in his view:

“Cryptos remain at the mercy of the Fed and stuck in a merry dance with the Nasdaq and other risk assets,”

He added:

“We’re hearing Bitcoin forecasts in the mid-teen and single-digit thousands which tells you the type of macro environment crypto is facing for the first time — and the levels of fear.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.