- Shelter, food, and fuel accounted for the highest monthly gains in the CPI, a price index that analyses changes in a wide range of goods and services. On a month-to-month basis, the energy index rose 3.9 percent after dropping in April.
- Around the same time as the BLS report was released, the larger crypto market took a knock. According to CoinMarketCap, Bitcoin has dropped 4.2 percent while Ethereum has dropped almost 7% in the last 24 hours. Other cryptocurrencies were impacted worse, including Solana (down 9%), Avalanche (down 10%), and Cardano (down nearly 11% in the last day).
- The Fed is treading carefully as it raises interest rates, making borrowing more expensive in an effort to chill consumer spending and the economy. If they raise interest rates too quickly, the economy could enter a recession, and the current report provides them less breathing room.
After falling in April, inflation picked up again in May, potentially harming cryptocurrency markets already struggling from the Federal Reserve’s stricter monetary policies. The Consumer Price Index (CPI) increased 8.6% in the 12 months ending in May, the biggest 12-month gain since December 1981, according to the Bureau of Labor Statistics (BLS).
Ethereum Has Dropped Almost 7% In The Last 24 Hours
Shelter, food, and fuel accounted for the highest monthly gains in the CPI, a price index that analyses changes in a wide range of goods and services. On a month-to-month basis, the energy index rose 3.9 percent after dropping in April. In May, the electricity index grew by 1.3 percent, suggesting that electricity prices have risen by 12 percent in the last year, raising the cost of bitcoin mining.
Mining will become more expensive and less profitable as energy costs rise, according to Jason Schenker, chief economist at Prestige Economics. As for crypto in general, if you see individuals putting their money into more defensive assets, I don’t think it’s something that would benefit crypto. If the Fed continues to raise interest rates aggressively, institutional investors may be enticed out of the cryptocurrency market in favor of less volatile options such as treasuries and bonds. The prices of most digital assets would suffer if there was a selloff.
Around the same time as the BLS report was released, the larger crypto market took a knock. According to CoinMarketCap, Bitcoin has dropped 4.2 percent while Ethereum has dropped almost 7% in the last 24 hours. Other cryptocurrencies were impacted worse, including Solana (down 9%), Avalanche (down 10%), and Cardano (down nearly 11% in the last day).
We’ve already seen institutional investment slow down, and this trend is likely to continue, said Lucas Outumuro, head of research at IntoTheBlock, a crypto data science firm. Bitcoin has not shown to be an effective inflation hedge as many had hoped, despite the fact that this was one of the primary narratives driving it ahead last year. Today’s price action, on the other hand, demonstrates. Today’s price action, however, shows Bitcoin falling less than the Nasdaq and S& if this pattern continues, institutions may reconsider their position.
Crypto Market Slips
Inflation is driving people to be more careful with their money, especially those with lower incomes who spend a larger portion of their budget on necessities like food and rent. Budget cuts may have a negative impact on demand for digital assets. The Fed is treading carefully as it raises interest rates, making borrowing more expensive in an effort to chill consumer spending and the economy. If they raise interest rates too quickly, the economy could enter a recession, and the current report provides them less breathing room.
Higher borrowing rates make it more expensive for most businesses to expand, which has a significant influence on IT company growth. According to a report issued in April by Arcane Research, the price of Bitcoin has become increasingly associated with the price of tech stocks listed on Wall Street. According to statistics from blockchain analytics firm Chainalysis, this tendency has maintained through June.
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