How will Bitcoin and cryptocurrencies react?

Trading Economics estimates that data releases this week will indicate inflation is rising again in a potential red flag for Bitcoin and cryptocurrencies.

Led crypto market Bitcoin It has struggled to find its footing in recent weeks, and a big factor behind this has been uncertainty An endless barrage of developments From the US it indicates an expected return of inflation and the Fed is more hawkish as a result.

This barrage looks set to continue this week as the market anticipates two of the Fed’s most closely watched metrics, the Producer Price Index (PPI) and the Consumer Price Index (CPI).

Will crypto asset prices melt under the weight of the heat as inflation is seen as hot again?

Inflation coming hot?

The US Producer Price Index and Consumer Price Index will be released on Tuesday, January 14 and Wednesday, January 15, respectively, as economists expect the data to show that inflation is on the rise again.

The Producer Price Index measures price changes from the perspective of sellers, while the CPI measures price changes from the perspective of consumers. As such, both measures are leading indicators of inflation.

Trading Economics estimates that data releases this week will indicate that inflation is rising again. Specifically, they expect a 3.3% year-on-year increase in the PPI in December 2024, higher than the previous 3%.

The outlook does not improve when economists exclude food, as the year-on-year core PPI is also expected to reach 3.5% in December 2024 from the previous 3.4%.

Unsurprisingly, December 2024 CPI forecasts paint a similar picture. The CPI is expected to rise year over year to 2.9% from 2.7% previously, moving away from the Fed’s target of 2%. However, the core CPI on an annual basis could remain stable at 3.3%.

These forecasts come on the heels of higher-than-expected jobs and president-elect numbers released last week Donald Trump’s threats Due to high customs duties on Chinese goods.

So, how will the cryptocurrency market react?

There will likely be muted price action in the future

Historically, Bitcoin and the broader cryptocurrency market have not fared well in risk-free environments, and this time will likely be no different.

Talk to Basic encryptionJames Butterville, head of research at CoinShares, confirmed that this week’s data is likely to put selling pressure on Bitcoin and other crypto asset prices.

“Combined, these factors [referring to the anticipated rise in producer and consumer costs] It could lead the market to not raise interest rates during the first half of the year, which could impact any gains in Bitcoin prices. As a result, bullish drivers will likely stem from the approval of some form of Bitcoin-related legislation after the opening.” He said.

The inauguration in question is Donald Trump’s anticipated inauguration as president on January 20. The president-elect made many pro-cryptocurrency promises during the election campaign, the most notable of which is the promise to create a strategic reserve for Bitcoin.

Amid high inflation expectations The CME FedWatch widget appears There is a 97% probability that the Fed will leave interest rates unchanged after the FOMC meeting on January 29.