Bitcoin price will hold up above the critical levels of support as market participants digest cooling inflation risks and trade yen risk?
Inflation figures: a brief overview
Inflation is like the temperature in a room — too hot, and it’s uncomfortable; too cold, and it’s just as bad. For the past few months, the U.S. economy has been trying to find that ‘just right’ spot and all eyes are on the latest numbers to see where we’re headed next.
Producer Price Index (PPI) data for July 2020 just arrived, indicating a cooling of inflation. PPI inflation decreased to 2.2% in July 2024, which was slightly less than expectations and the lowest since March.
The core PPI fell by 2.4% as well, which surprised many people who had anticipated it would be higher. A rate cut for September is almost certain with these numbers.
The story isn’t over yet. Consumer Price Index Data (CPI), set for release on August 14, is what everyone wants to hear.
The data are important because they give a better picture of the price changes that affect everyone, from consumers to investors.
Wall Street predicts a rise of 2.9%, but it’s possible that the actual number could be much higher. It could be a sign that the inflation rate is rising again, as it would mark the third rise in the last five months. It could have a major impact on everything from market expectation to interest rate.
The inflation rate is not the only issue. Only a couple of days ago on 5 August, there was a concern about inflation. financial Unwinding the monetary policy has caused the markets to be shookn. yen carry trade.
The carry trade is an investment strategy whereby you borrow in Japan at low rates of interest and invest in other assets that yield higher returns.
This strategy worked smoothly until Japan’s interest rates started rising, as they did recently for the second time since 2007 — the first being in March 2024. It was an upheaval in the markets, with risks still present.
The question is: Could these global risks be exacerbated by the CPI and the risks associated with the carry trade of the yen? financial Will uncertainty be the end of crypto? Find out.
Uncertainty about the Yen Carry Trade continues to cloud market
Although recent data on inflation in the U.S. suggests a cooling, risks related to the yen carrying trade are a threat that can have an impact globally, and even the crypto market.
Unraveling this huge trade estimated Reuters has been able to send shockwaves around the world with its estimate that up to $4 trillion could be involved. financial The markets have been impacted by a sudden selloff in high-risk assets, such as Bitcoin.BTCOn August 5th, the price plummeted down to $49,000.
BTC, however, has recovered its position and trades at about $61,000 on August 13th. This represents a 24% increase.
Richard Kelly, Head of Global Strategy at TD Securities told CNBC that he would be ‘very hesitant’ to declare the end of the carry trade unwind.
He thinks that the potential for interest rate differentials to change and the undervaluation the Japanese yen could cause further market disturbances in the future. next Two to three years.
This is because, according to Barclays analyst, there still appears to be some selling pressure left from the unwinding of carry trades. They warn that it’s ‘too early’ to call an all-clear on the unwinding and that volatility is likely to remain elevated.
The crypto market faces two challenges from these risks: the strong yen, which could scare investors off high-yielding, but risky, assets; and a market correction that is sharp enough to erode investor confidence.
What is happening on the market?
Bitcoin, the most popular crypto currency, is experiencing turbulent times. own Set of challenges Copper Research has a set of challenges. “Opening Bell” reportBitcoin has had a disappointing recent performance.
Even though displaying resilience in the face of the German government’s sale Bitcoin is still struggling to recover the momentum gained in March, when Bitcoin reached an all-time record high.
This report highlights the fact that global market conditions are tough. These include events such as U.S. elections, UK riots and Middle East tensions.
The lack of Bitcoin buying is particularly notable. When the German market collapsed, many traders saw it as a chance to buy the drop.
The recent volatility in the market has frightened many investors away, leading to minimal Bitcoin buying.
But there’s a positive side to this. Recent data The inflows to Bitcoin and Ethereum are increasing. ETFs (ETHThe last two days, he has been unable to sleep.
The 12th spot will be revealed on August 13. Bitcoin ETFs Inflows totaled $38.94 millions, an increase of nearly 40% from $27.87millions recorded the day prior.
BlackRock IBIT Fund led the way with $34.6m in new money, taking its grand total up to $20.36bn since launch.
Ethereum has also seen a rise in interest. The nine spots Ethereum ETFs On August 13, net inflows were $24.3 million, a significant increase from $5 million the day before. BlackRock ETHA was in the lead, with $49.1 inflows after an absence of activity.
What to Expect next?
What’s next for the Bitcoin market? Bitcoin will continue to grow. next In the weeks to come, the cryptocurrency market could take a new direction.
Michaël van de Poppe, a well-known crypto analyst, recently noted that Bitcoin is in a choppy phase, with its immediate future hinging on whether it can hold above the $56,000 to $57,500 range.
According to him, if Bitcoin can stay in this range, it could lead to an increase towards the top of the range and possibly a new record high.
The increase in Bitcoin and Ethereum ETFs also indicates institutional investors’ interest, even if they are cautious. If volatility persists, however, it is possible that we will see further sideways movements or even worse, another drop.
Now, we’re playing a game of waiting. Bitcoin’s current range could be broken if the macroeconomic climate stabilizes. It may even make new highs if it does. Always be cautious and trade with caution. Never invest more than what you can afford.
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Source: crypto.news