Government Assets’ Waning Popularity Likely to Trigger Crypto Market Bull Run

Crypto markets have currently shown resilience against larger volatility and financial strain. Being above the $50,000 level, the OG cryptocurrency has garnered a lot of interest and traction from investors. With data suggesting that market conditions might deteriorate in the near term, government assets might see a downfall and weakness. Crypto markets, in such a situation, are likely to ascend with investors shifting their money into the virtual currency world.

Data in the US suggest hotter-than-expected conditions

The US PPI inflation data released by the Bureau of Labor Statistics on Friday showed that wholesale inflation experienced a resurgence in January. The Producer Price Index for final demand increased by 0.3% in January, seasonally adjusted, as compared to the market expectation of 0.1%. Core PPI inflation rose 0.9 percent for the 12 months ended January 2024, showing a slower-than-expected recovery.

On the other hand, the U.S. Bureau of Labor Statistics announced the consumer price index (CPI) inflation data for January showing that inflation came in at 3.1%. The number was lower than the December inflation print of 3.4% but was still higher than overall market estimates of 2.9%.

Both data points are highly important for crypto and larger financial markets from the perspective of rate decisions. The US Federal Reserve usually considers these data points to gauge inflation, a metric directly correlated with rate decisions.

Fed rate cuts shift to July

An important tool that investors use to evaluate investments has always been the Federal Reserve’s rate decisions. The devaluation of government securities caused by lower interest rates often makes assets like cryptocurrency more appealing. At present, the two data points have shifted expectations of a rate cut by the US Fed to July from an earlier expectation of June. Market participants are highly anticipating a rate cut to happen soon. The ease in economic conditions will bolster investment decisions and also see investors going for riskier assets.

However, at present, with disappointing data, government assets like the treasury have seen a downturn. The 10-year US Treasury yield will remain volatile for some time, according to Wells Fargo Investment Institute strategist Luis Alvarado. That coupled with bond yields falling has dented sentiments around how the market is perceiving the once-haven assets.

Crypto markets head for a bull run

Amid the falling traction towards government assets, crypto markets are poised to have a bull run in the future. At present, the outlook for many cryptocurrencies, especially that of Bitcoin is anticipated to be positive this year. Various institutions have been placing bets that prices for the OG-crypto will see an upscale in the future. This includes Bitwise’s forecast that in 2024, the price of Bitcoin will surpass $80,000. For the first half of 2024, at least, institutional investment in Bitcoin will continue to be the main focus, according to Coinbase.