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Bitcoin and Other Markets Are Hanging On A Thread as July CPI is About to be Released

By BlockBunny | BlockBunnyBlog | 7 Aug 2022


All eyes are on the next CPI, which is going to release on August 10. The upcoming CPI is particularly significant as it is going to determine the next market move (I know I said that about the non-farm payrolls report as well, but this is even more significant as it adds confidence to the next big market move.) The imminent CPI report will heavily affect Bitcoin, gold and silver. I know there are some critics that say CPI's consideration of consumer products does not encompass all economic production or consumption; it's flawed and defective as a measure. However, since the majority of consensus thinks CPI equals inflation, then we should go along with it for the sake of simplicity.

dee20b02f4da88212b2a90ff8e40c7e176a667b294de71da45d13a3cdda79690.png
[Source: https://www.fxpro.com]

The world's richest man and CEO of Tesla Inc., Elon Musk, stated he believes the world economy has passed its inflation peak. Apparently, he's not the only one that thinks we already reached peak inflation in June, as the consensus of the impending July CPI is 8.7%. The positive outlook of CPI could be terrible for the market because if the actual CPI exceeds 9.1%, the gold, silver and BTC market are going to plummet. The reason for that is simple; high inflation is going to cause the Fed to raise the rate again. In addition to that, the employment rate is higher than expected, which could lead to a more aggressive hawkish stance.

The Fed needs to raise interest rates at the same time to prevent too much tightening as it might cause something worse than inflation – deep recession or depression. A strong job report gives them the confidence to raise the rate without crashing the financial system in the process. As we already know, the hawkish stance of the Fed this year is very aggressive. I mean just look at the chart of the U.S Fed fund rate chart.

1507b61e03a805907a9dbb86f8524fcb88929886ef641ed184360b47153d6fb8.png
Look at that steep boi. That's a vertical line!
[Source: https://tradingeconomics.com/united-states/interest-rate]

Conclusion

If the July CPI shows higher inflation, it's very likely that Fed will raise another 75 or even 100 basis points on the next fed decision rate on September 21. Expect high volatility these few days. The price chart is going to be crazy again. However, if the inflation peaked, which is < 1.3 rates of increase, then the Fed might hike the rate lower than 0.75%. That should be bullish for BTC, gold and silver market as inflation will be tamed earlier than expected, which also means less tightening in the future as inflation already went down.

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BlockBunny
BlockBunny

I went down the crypto rabbit hole so you don't have to.


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