Ok so today something rather interesting (and slightly frustrating) occurred in the crypto world and when you are tracking Bitcoin, Ethereum or even meme coins such as Dogecoin you might have noticed it as well.

The whole crypto market began to fall after the U.S. published the recent Consumer Price Index (CPI) report. On the surface the CPI was a positive news: inflation is easing and core prices have increased only 3.1 percent, the slowest since 2021. That normally would imply that we are going to see rate reductions, correct? Not so quick.

What actually shook the market is the way the investors perceived that data. Rather than being jubilant traders began to fret that the Federal Reserve would halt reduction of interest rate. And crypto which relies considerably on liquidity and investor confidence is not the best news. The risk on vibe vanished in a second and prices fell rapidly.

Bitcoin declined by more than 3% and dipped under the 106K mark. Ethereum was not left behind either the coin has lost over 4% and trades at about $5,600. Altcoins were struck even worse. Dogecoin and XRP? Off about 6 percent. It is as though the market suddenly hit the brakes.

And in case you are thinking why does this matter?. Here is the thing: crypto is not only tech or digital money but rather it is also closely connected to the rest of the economy. The rate of inflation, interest rates, and Fed policies are all factors that affect the amount of money that will be flowing into (or out of) the space. As soon as inflation declines and Fed remains cautious investors prefer to withdraw and adopt a waiting attitude until further clarifications.

My personal view is that this is a short term shake out and not the end of the bull run. A reminder though that in a decentralized world, macro news still has a sting. I have a keen eye on the next Fed meeting and the CPI report of July as those may be the next major catalysts as to where we go next.