‘In The Crosshairs’ — New $100 Billion Fed Earthquake Now Threatening Bitcoin, Ethereum & Crypto Price
BitcoinBTC and ethereum, the two biggest cryptocurrencies, have seen their New Year rally stall amid fears that “Operation Choke Point 2.0” could be about to hit the crypto space.
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Bitcoin price rebounded from December’s lows as traders bet the US Federal Reserve is about to declare victory in its war against soaring inflation, helping the price of ethereum and other major cryptocurrencies to rally – with some predicting that smaller coins can be on their way sharply higher.
Now bitcoin, ethereum and crypto markets are braced for next week’s US inflation data, with concerns growing that it could be higher than markets estimate, potentially triggering another bout of volatility after 2023 was declared the “year of opportunity”.
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“The Fed is on its toes, waiting for other data shocks before it can assess its gains in the inflation battle,” Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown, said in an emailed comment, adding the Fed chief. Jerome Powell this week indicated “the process of lowering the price spiral was only just beginning, and could last at least into next year.”
The latest US consumer price index (CPI) report is out on Tuesday, February 14, with market prices in a CPI increase of 0.4%, according to a Reuters Poll.
Last week, the University of Michigan survey’s inflation outlook, a measure Powell has previously suggested the Fed is tracking, gave its highest reading since January 2022, suggesting households expect higher inflation to persist over the coming year.
As a result, the looming CPI report has been “put in the crosshairs,” said Mazen Issa, senior FX strategist at TD Securities. Reuters. A hotter-than-expected inflation report could mean the Fed opts for a bigger rate hike next month in an attempt to further siphon liquidity from the system.
The Fed has slowed the pace of rate hikes in recent months after raising rates in response to inflation hitting a 40-year high last year.
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Earlier this week, just days after markets were rocked by the latest “extraordinarily strong” US jobs report, Powell said it would likely take a “significant period” to stop the resulting inflation.
Traders were still inclined to interpret his comments as dovish, but because of his declaration, the “disinflation process” has now “begun”.
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