Market Reaction to US Inflation Numbers
On Wednesday, blue chip cryptocurrency prices experienced a decline following the release of the latest US Producer Price Index (PPI) inflation data, which exceeded expectations. Bitcoin (BTC) saw a decrease of approximately 2.5% for the day, dipping to the mid-$26,000 range, marking the lowest level of the month so far. Additionally, Bitcoin broke out of its short-term uptrend that had been in place since mid-September. Ether (ETH) also suffered losses, trading around $1,550, and threatening to break below key support levels, potentially leading to a rapid drop towards the $1,300 range. Other cryptocurrencies such as Solana (SOL), Cardano (ADA), XRP (XRP), and Dogecoin (DOGE) also experienced declines ranging from 1% to 5% over the past 24 hours, according to CoinGecko.
Impact of Inflation on Crypto and Fed Commentary
The hotter-than-expected inflation data raises concerns for the crypto market as it may prompt the Federal Reserve (Fed) to raise interest rates further and maintain them at higher levels for an extended period. However, recent statements from Fed policymakers indicate a contrary view. One Fed policymaker expressed that the bank does not believe there is a need for further interest rate hikes, especially after the recent rise in long-term US bond yields. Consequently, US bond yields and the US dollar have retreated from their recent highs, potentially providing support for the crypto market. Nevertheless, geopolitical tensions in the Israel/Palestine conflict continue to weigh on crypto sentiment.
