Producer Price Index (PPI) Higher Than Expected Does Not Increase Inflation Concerns, Stimulating Hopes That the U.S. Federal Reserve (Fed) Will Reduce Interest Rates in September.
New PPI data shows a slight increase in inflation pressure, causing significant volatility in the cryptocurrency market, but also increasing the probability that the Fed may cut interest rates by 25 basis points in the upcoming meeting.
- PPI increase raises concerns about next month's CPI and its impact on the Fed's interest rate decision.
- Cryptocurrency market faces liquidation of over 1 billion USD, mainly from traders holding long positions.
- Positive signals for potential Fed interest rate cuts help boost the cryptocurrency market's upward trend.
How Did the Cryptocurrency Market React to Inflation Pressure?
Thursday's PPI data highlighted the possibility of a higher CPI next month, causing investors to worry that the Fed will maintain interest rates at 4.5%. This led to strong liquidation in the cryptocurrency market, especially in long positions.
According to CoinGlass statistics, the cryptocurrency market experienced over 1 billion USD in liquidation, with long position traders losing more than 827 million USD. This pressure reflects caution about upcoming monetary policies.
"Hardly any inflation at all. 401(k) s and the stock are soaring."
Donald Trump, Former U.S. President, 23/6/2023
Overall, despite the pressuring data, there are positive signs from trading platforms estimating an 81% chance of the Fed cutting interest rates by 25 basis points. Notably, the possibility of a 50 basis point cut has increased to 11%, surpassing the no-cut rate (10%) for the first time.
What Will Be the Next Development in the Cryptocurrency Price Increase Market?
The cryptocurrency growth market has just entered an exciting phase, especially after the price recovery of Ethereum and Bitcoin. The price surge is reinforced by increasing interest from institutional investors with investment strategies targeting cryptocurrency treasury funds.
Moreover, the executive order allowing 401(k) retirement funds, with over 8 trillion USD in managed assets, to diversify investments in cryptocurrencies has opened sustainable opportunities for this market.
The expansion of cryptocurrency investments from retirement funds is a strong signal indicating widespread acceptance and sustainable growth potential of the industry.
Financial Market Analyst, 2023
What Factors Most Significantly Influence the Fed's Trend in the Upcoming Meeting?
The latest PPI data and CPI predictions are crucial indicators for the Fed to assess its next move. Increasing inflation pressure may cause the Fed to carefully consider interest rate cuts, while the desire to support the financial market and economy still creates momentum for slight interest rate reduction expectations.
Data analysis from Kalshi shows that the probability of a 25 basis point interest rate cut is highly evaluated by investors, and the 50 basis point cut rate has also slightly increased, reflecting a shift in market expectations towards a more flexible monetary policy.
Frequently Asked Questions About Inflation Impact and the Cryptocurrency Market
How Does Inflation Affect the Cryptocurrency Market?
High inflation typically leads to significant volatility, creating liquidation pressure and increasing risk, but also opens investment opportunities based on monetary policy developments.
Why Might the Fed Cut Interest Rates in the Context of Escalating Inflation?
The Fed considers overall economic factors, including growth and financial markets, to adjust interest rates to balance inflation control and promote development.
What Does Allowing 401(k) Investment in Cryptocurrencies Mean?
This encourages institutional investor participation, increases liquidity, and reinforces confidence in the long-term potential of cryptocurrencies.
Are Liquidations Common in the Cryptocurrency Market?
Large liquidations typically occur when there is information causing significant volatility or monetary policy changes, thus being part of the market cycle.
What Should Individual Investors Pay Attention to During Major Market Fluctuations?
Strict risk management and close monitoring of macroeconomic conditions are essential to avoid severe losses.
