The long-awaited moment has finally arrived: the US government today revealed inflation figures for October, an announcement likely to give new impetus to the recent surge in Bitcoin.
Will the US inflation report decide the fate of crypto?
After a successful five-week period that propelled Bitcoin to nearly 40% growth, the crypto is stalling around $37,000. With excitement surrounding the prospect of a green light for a Bitcoin Spot ETF temporarily subsided, investors’ eyes are now turning to Tuesday’s consumer price index as a possible growth trigger.
The expected October CPI report suggests a slowdown in inflation compared to previous months. Economists forecast a monthly rate of 0.1%, down from 0.4% in September. Over one year, inflation is expected to increase from 3.7% to 3.3%.
Although these numbers well exceed the target set at 2% by the American Federal Reserve (Fed), a gradual decline in inflation could influence the Fed’s decisions regarding interest rates.
A favorable context for crypto
If the report confirms a weakening of inflation, the Fed could slow down rate increases, or even consider reducing them in the long term. Lower rates make risky assets such as Bitcoin more attractive to investors, reducing the opportunity cost compared to risk-free investments.
A slowdown in inflation and a less aggressive monetary policy from the Fed would create a more favorable environment for Bitcoin and cryptocurrencies. Their status as assets decorrelated from traditional markets and their potential to hedge against inflation would regain the upper hand in the minds of investors.
The outcome of the inflation report remains uncertain, but its impact on the outlook for Bitcoin and cryptos will be significant.
Confirmation of the scenario of a “soft landing” for the economy, desired by the Fed, could limit the risks of a pronounced recession, thus strengthening market confidence. On the other hand, a persistence of inflationary pressures would probably keep the Fed on the path of a restrictive monetary policy, weighing on the upward potential of Bitcoin, sensitive to the overall liquidity of the markets.
Regardless, the future of Bitcoin is closely linked to the economic decisions that will take shape in the coming days.
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