Bitcoin and Ethereum have reacted negatively to the Consumer Price Index (CPI) print in the United States. The metric is used to measure inflation in the U.S. dollar and hit 9.1% for June which represents an increase from May’s results.
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At that time, the crypto market crashed the following days after the CPI print. This meant inflation was still soaring and hinted at more intervention from the U.S. Federal Reserve (Fed). High inflation translated into high pain for Bitcoin and other risk-on assets.
At the time of writing, BTC’s price trades at $19,400 with a 3% loss in the last 24 hours. ETH’s price trades at $1,000 with a 3% loss in the last 24 hours hinting at potentially further losses for two larger cryptocurrencies by market capitalization.
Economist Alex Krüger noted a 40% decline in the price of these digital assets and a 7% decline in the S&P 500. The downside price action is supported by the expectation that Fed will become more aggressive as inflation trends upwards. The economist said:
The last CPI number triggered a massive crash, with the S&P falling 7% in 2 days. Meanwhile the ensuing crypto crash was so intense that CPI could be relabeled as the Crypto Pain Index.
However, Krüger believes this time Bitcoin and Ethereum will be more impervious to the CPI print. The last time this metric became public it beat the market expectations, this time inflation stayed within expectations.
Thus, the impact from this metric might have been priced in. According to the economist, the market “has already sold off considerably since Sunday in anticipation” of June’s CPI.
Inflation might have reached a top, but Krüger believes there is stale data from different sectors used to measure inflation. This point to a decline in energy prices which should contribute to a drop in July’s CPI. This might provide some breathing room for Bitcoin and Ethereum.
Important context ahead of tomorrow’s CPI release:
Headline inflation from last month will be significantly affected by stale gas price data:
Retail prices have declined from the June avg and declining oil prices and gas futures suggest they have further to fall. pic.twitter.com/3wmwqHzRH3
— Brian Deese (@BrianDeeseNEC) July 12, 2022
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