With Delay in Fed Rate Cuts Looming, Will Crypto See Block in Bull Run?

Crypto markets have always been sensitive towards macro-economic factors. Current data in the US that indicates a resilient economy, which has pushed speculations around a delay in the Fed’s rate cuts. Market participants have now started questioning the future trajectory of crypto markets as jitters from the sturdy US economy loom larger.

US Economy Shows Resilience

In an interview with Yahoo Finance, Yardeni Research, Inc.’s Ed Yardeni says that the US economy is remarkably resilient at the moment. The remarks follow economic data released in February showing that most indicative data points came in hotter than expected.

Previously, wholesale inflation saw a rebound in January, according to US PPI inflation statistics. Month over month, the PPI index rose by 0.3% in January. This was higher than the anticipated number of 0.1%.  Market players closely monitor the PPI inflation statistics as a measure of wholesale inflation and as an indicator of pricing.

In addition to the same tone, the Consumer Price Index (CPI) data showed that inflation came in at 3.1% in January. Economists polled by Reuters had expected consumer inflation to rise 2.9% annually in January after 3.4% growth in December. Crypto markets were also impacted by the report as Bitcoin prices took a fall after the US CPI data was released.

Both the PPI and CPI reports are especially important to the Federal Reserve as they indicate the inflation status, which the Fed has been trying to control for a long now.

Good Economic Data Sparks Concerns Over Delay in Fed’s Rate Cuts

Data points in the US have strengthened expectations that the Fed may postpone cutting interest rates for some time. Investors have been speculating on the potential speed and magnitude of interest rate cuts from the Fed since the year’s commencement. Nonetheless, given the more heated-than-anticipated statistics, market players are already pricing in bets that a rate cut will only occur in July. This schedule change follows earlier predictions of rate reductions in March and May.

Will Crypto See a Break in the Bull Run?

Investors have historically relied on the Federal Reserve’s rate choices as a critical tool for asset evaluation. Government securities are often devalued by lower interest rates, which makes assets like cryptocurrency more appealing. In light of a delay in the Fed’s rate cuts, crypto markets are currently bracing for volatility as investors might stick with traditional assets for some time.

However, on the brighter side, a resilient economy also keeps investor appetite upstanding. A stable purchasing power and an appetite for riskier assets go hand in hand with upbeat economies. In such a situation, crypto markets could likely continue the ascending momentum, irrespective of the Fed’s rate decision.