US Inflation Concerns Put Crypto Market on Alert

Market observers and investors have worried about the market’s growing volatility after the Fed flagged ongoing high inflation. Of course, the financial system is broken, so if the Fed keeps raising, bedlam is dead ahead.

Bitcoin (BTC) has been in a sideways trend for the past few weeks, with prices hovering around $26,000. As shown by CoinMarketCap’s data, many times did the largest cryptocurrency dipped below $25,900 last week, making August its worst month of the year.

Ethereum has struggled to rebound above $1,800, the opening mark of the month. The largest altcoin by market cap is traded at $1,633 at the press time, a 2% loss in a day and a 12% loss in a month.

Similar losses are also reflected in other top altcoins like Ripple (XRP), Binance Coin (BNB), Cardano (ADA), Dogecoin (DOGE), and TRON (TRX). The biggest gainers are CRO, DYDX, and FIL.

CRO is up 4.54%, DYDX is up 3.19%, and FIL is up 3.04%. These altcoins are all seeing strong gains today.

Bitcoin’s Worst Month

Among the top 100 coins, the biggest losses belong to SUI, THETA, and INJ. SUI is down 4.73%, THETA is down 4.18%, and INJ is down 3.66%. These altcoins are experiencing significant losses today.

Last week, Solana Pay announced its strategic partnership with ecommerce giant Shopify; however, one swallow does not make a summer. Solana (SOL) ended the week at $20,29, a decrease of 4.14% value.

Bitcoin is six months away from the next halving. Many expect the event to send the price up to $35,000 before it happens and eventually break through $148,000 post-halving. Bitcoin halving is anticipated for Q1 of next year.

Bitcoin Traders Exercise Caution Amid Market Uncertainty

The Cryptocurrency Fear and Greed Index indicates that the market sentiment was on the fear side last week. However, according to Alex Kuptsikevich, a senior market analyst at UK online broker FxPro, bargain-hunting remains on hold as the crypto market is far from oversold.

Even though Bitcoin seems steady, “Bitcoin’s butterfly index has risen to yearly highs. It shows that investors and market makers are pricing in tail risk,” said a volatility trader at Blofin, a crypto service provider.

Tail risk refers to the possibility of an asset or a group of assets shifting more than three standard deviations away from their current price. This concept looks beyond the typical risks associated with normal market fluctuations.

Crypto analysts warn that volatility looms following the recent high inflation remarks. During the Jackson Hole Economic Symposium on August 25, Jerome Powell stated that the US inflation is still too high, suggesting the possibility of interest rate hikes in the coming FOMC meetings.

The recent remarks are less harsh than the Fed Chairman’s speech last year. Since March 2022, the Fed has raised interest rates by a total of 5.25 percentage points. The inflation index has since fallen significantly.

Powell stressed that the Fed is prepared to raise rates further as needed and will maintain a restrictive policy until inflation is sustainably declining toward its target.

In addition to macroeconomic uncertainty, legal uncertainty remains a major concern for Bitcoin investors, as recently reported by JPMorgan. Cryptocurrency is facing legal pressure in many countries, and there is a risk of further regulation or even bans. This uncertainty has weighed on Bitcoin’s price in recent months.

However, the financial institution said there are signs that the downward price momentum may be slowing.

A lot of factors have put crypto investors on alert. As we enter September, the coming month may be a pivotal and potentially challenging period for cryptocurrencies, especially if these digital assets struggle to recover lost ground.

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