For riskier assets such as cryptocurrencies, higher-than-expected inflation data is problematic. The market now expects the Fed to raise rates further, while the deadline for raising them is lengthening. This is likely to drain more liquidity from the market, weighing on Bitcoin and other cryptocurrencies.
In this way, within the most pronounced falls, those of Cronos (-16%), Near Protocol (-11%), followed by Solana (-10.2%); Bitcoin (-10%); Uniswap (-8.5%), Avalanche (-8%), and Cardano (7.9%). Meanwhile, Ethereum yields 7.4%.
“It was a crazy day,” summed up Greg Bassuk of AXS Investments. “Markets were rocked by this bad CPI (index) and responded accordingly,” said Cliff Hodge of Cornerstone Wealth.
For Edward Moya, from Oanda, investors fear “having been too optimistic in foreseeing the end of the adjustment cycle” of Fed rates.
“The market sees inflation going the other way, which would force the Fed to maintain its offensive stance, and even go further” than it has gone, observed Quincy Krosby of LPL Financial.
Some 34% of operators favor a rate increase of one percentage point at the agency’s meeting next week. Until recently, the vast majority expected another 0.75 basis point increase. “The market worries that the Fed will lead us into a recession or lock up the system by depriving it of liquidity,” Krosby explained.
“The problem is to know to what extent high prices will weigh on the real economy and consumers,” Bassuk said. Demand could be affected doubly, on the consumption side and by interest rate hikes that make credit more expensive.
Rates on 10-year US Treasury bonds rose to 3.41%, from 3.35% on Monday. The two-year rate, more representative of market expectations regarding monetary policy in the short term, soared to 3.78%, for the first time in almost 15 years, since November 2007.
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Source: Ambito
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