Cryptocurrency markets are currently showing resilience to greater volatility and financial strain. The OG cryptocurrency has surpassed the $50,000 level and is attracting a lot of interest and attention from investors. Government assets could fall and weaken as the data suggests market conditions may worsen in the near term. In such a situation, the crypto market is likely to rise as investors move their funds into the crypto world.
US data suggests hotter than expected conditions
U.S. PPI inflation data released by the Bureau of Labor Statistics on Friday showed wholesale inflation rose again in January. The producer price index for final demand rose by a seasonally adjusted 0.3% in January, compared to market expectations of 0.1%. Core PPI inflation rose 0.9% in the 12 months to January 2024, indicating a slower-than-expected recovery.
Meanwhile, the US Bureau of Labor Statistics released the Consumer Price Index (CPI) inflation rate for January, which was 3.1%. This figure was lower than December's inflation rate of 3.4%, but still higher than the broader market estimate of 2.9%.
Both data points are extremely important to the crypto market and the larger financial market from a rate determination perspective. The US Federal Reserve typically considers these data points to measure inflation, and this metric correlates directly with interest rate decisions.
Fed rate cut moves to July
An important tool investors use to evaluate investments has always been the Federal Reserve's interest rate decisions. A decline in the value of government bonds due to lower interest rates often makes assets like cryptocurrencies more attractive. Two data points have now pushed the Fed's rate cut expectations to July from the original June forecast. Market participants have strong expectations that interest rates will be cut soon. Easing economic conditions will strengthen investment decisions and push investors toward riskier assets.
But for now, disappointing data has led to a decline in government assets, including the Treasury. Yields on the 10-year U.S. Treasury are likely to remain volatile for some time, said Luis Alvarado, a strategist at Wells Fargo Investment Institute. Combined with falling bond yields, sentiment about how the once haven asset is perceived by the market has soured.
Cryptocurrency market heads towards bull market
The crypto market is poised for a future bull run as the traction on government assets declines. At the moment, the outlook for many cryptocurrencies, especially Bitcoin, is expected to be positive this year. Various institutions are betting that the price of OG crypto will rise in the future. This includes Bitwise's prediction that the price of Bitcoin will exceed his $80,000 mark in 2024. According to Coinbase, institutional investment in Bitcoin will remain the main focus for at least the first half of 2024.
