US PPI Report: Will It Trigger Crypto Market Rally Or Halt Gains?

Investors are closely eyeing the release of US Producer Price Index (PPI) data today as it holds significant implications for various markets, including the crypto domain. Moreover, analysts have rolled out analysis for the aftermath of the US PPI report release on the crypto market.

How Will The PPI Report Impact Crypto Market?

Analysts anticipate that the US PPI may have declined from 1.0% in January to 0.6% year-over-year (YoY) in January 2024. This projected decrease suggests a trend toward disinflation, which is a positive development for risk asset enthusiasts. A lower PPI could indicate a potential for softer inflationary pressures in the near future, a favorable scenario for market bulls.

However, market reaction could vary based on the actual PPI figures. The PPI report is expected to follow the CPI report, which fell short of Wall Street estimates. In the event of a “hot print,” indicating unexpectedly high PPI numbers, risk assets may experience a negative response.

Such an outcome could signal a need for the Federal Reserve to maintain higher interest rates for an extended period, potentially leading to a market shift away from pricing in rate cuts. On the other hand, if the PPI numbers come in softer than expected, there might be a surge in risk assets. In addition, the market could brace for an increased potential for a Fed rate cut this year, which could be bullish for the digital asset domain.

Also Read: Institutional Investors Pouring Huge Money Into Crypto

CPI Report’s Brunt On Crypto

Earlier, Bitcoin (BTC) witnessed a decline below the $49,000 mark on Tuesday following unexpected inflation data, which dampened hopes for potential interest rate reductions. This downward movement in prices was triggered by the January Consumer Price Index (CPI) report, revealing a 3.1% year-on-year inflation rate, surpassing the analyst forecast of 2.9%.

Consequently, market sentiment shifted, with the likelihood of a Federal Reserve interest rate cut in May diminishing to just 34%, a notable drop from the 52% probability observed the day prior, as indicated by the CME FedWatch Tool. The reduced possibility of immediate interest rate cuts not only impacted the crypto market but also exerted pressure on traditional financial sectors.

Notably, the 10-year U.S. Treasury bond yield surged by 12 basis points, signaling increased investor confidence in future economic conditions. Concurrently, major indices such as the S&P 500 and the Nasdaq Composite experienced declines of up to 2%, reflecting broader market concerns amid shifting monetary policy expectations.

Also Read: Satoshi Nakamoto : Prediction On Bitcoin Trading Volume