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With the release of Consumer Price Index on Tuesday, the cryptocurrency market responded negatively. The data showed an inflation of 8.30% year on year while the core CPI was also worse than expected. This means that there is a possibility of a one percentage point interest rate hike. Overall, the inflation data is not a good sign for the crypto market, which could face a wave of volatility.
The Consumer Price Index or CPI is a key index that measures the increase or decrease in the price paid by the consumers on a monthly basis. This makes CPI an important indicator of the state of the economy.
Goldman Sachs Predicts Interest Rate Hike
Meanwhile, Wall Street bank Goldman Sachs predicts a 75bp hike in September. Whereas in in November and December the bank said it expects a 50bp hike.
“We now expect a 75bp hike in September followed by 50bp hikes in November and December.”
The CME Fed Watch Tool showed the possibility of a 20% chance of a 100 bps or one percentage point hike following the CPI data release. Following the CPI data release will be the Fed’s FOMC meeting scheduled for September 21. Outcome from the meeting would decide whether there would be 100 basis point interest rate hike or not. The crypto market is also anticipating the successful completion of The Ethereum Merge this week. Market analysts feel The Merge could prove to be a turnaround event for crypto industry, which was marred by a series of setbacks.
Earlier in the day, the prices of Bitcoin and Ethereum fell following the release of Consumer Price Index data. The top cryptocurrencies BTC and ETH dropped close to 6% in a space of a few minutes. As of writing, BTC price stands at $20,817.10, down 6.39% in the last 24 hours, according to price tracker CoinMarketCap. Ethereum (ETH), on the other hand, stands at $1,613.64, down 5.76% in the last 24 hours.
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