Crypto Markets Fall As Inflation Fears Begins To Creep Back In, Here’s Why

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The crypto markets turn red again as prices have fallen in the last 24 hours. The sluggish price movement could be the start of another bearish period as many experts are starting to doubt whether inflation has peaked.  

After trading as high as $24.5K, Bitcoin prices have fallen below $23K again. It is currently trading at $22.8K. Ethereum also went down from $1,764 earlier in the week to as low as $1,570. It has since rallied a bit and is trading at $1,622.

Ethereum Classic and Cronos have also experienced significant losses. 

Fears Of Inflation On The Rise

In an interview with CNBC, Adam Parker, the CEO and founder of Trivariate, revealed that he believes the CPI numbers will remain elevated. The Consumer Price Index is an important indicator, used by the Fed to gauge inflation. However, many experts believe that it is a lagging indicator that will not ease up for a long time.

According to Parker, he has seen nothing from the Fed that indicates any dovish intent. Meanwhile, he reveals that the rent in the housing market is increasing by 12% annually. A crypto and stock market rally would require CPI below 2, which would not be possible without a massive recession. 

Chris Toomey of Morgan Stanley also has revealed that inflation has not peaked. He also pointed to the state of the global GDP as a cause of concern. According to him, this inflation is now being viewed as structural, rather than transitory.

The Effect On Crypto

Inflation rise can have a brutal effect on crypto prices. The Federal Reserve curbs inflation with quantitative tightening and interest rate hikes. In June, the Fed increased the rate by 75 bps, which resulted in a crypto bloodbath.

However, when the July CPI numbers pointed to skyrocketing inflation, the crypto market did not have much of a downfall. According to some experts, the market had already priced in another bad CPI data and subsequent interest rate hike. The expectation was that the CPI numbers will improve from August and the Fed will reverse course.

Another bad CPI data and unusually large hike from the Fed can cause the crypto industry to return to a bear market.

Nidhish is a technology enthusiast, whose aim is to find elegant technical solutions to solve some of society’s biggest issues. He is a firm believer of decentralization and wants to work on the mainstream adoption of Blockchain. He is also big into almost every popular sports and loves to converse on a wide variety of topics.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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