Amid the positive market sentiment in cryptocurrency’s price, the broader crypto market has again gone into the red zone. The static price action has led experts to predict the beginning of another downtrend as U.S. inflation rises.
The price of BTC, previously at $24,5000, has slumped further to $23,000. As a result, Bitcoin currently trades at $22,900. On the other hand, Ethereum has sunk to $1,570 from $1,764 at the beginning of the week. However, at the time of writing, it had risen slightly to $1,624.
Rising Inflation Scares
The inflation rate in the United States does not appear to be decreasing as long as the prices of goods and services keep rising.
In an interview with CNBC, Adam Parker, the CEO of Trivariate, revealed that the consumer price index (CPI) will continue to remain high. The CPI is a critical tool used by the Federal Reserve to measure inflation.
However, the rising cost of living leads experts to believe that the CPI indicator will continue to stay high for a long period. Parker further added that the Fed lacked the genuineness to make any impressionable impact.
According to Chris Toomey, from the popular fund manager Morgan Stanley, U.S. inflation is yet to peak. Toomey noted that the current global GDP is another reason U.S. inflation will continue to linger. Inflation has thus become structural rather than temporary, as was first envisioned by stakeholders.
Inflation Impact on Crypto Prices
As different as the crypto market is, the continued rise in inflation will impact the performance of digital currencies. The Federal Reserve’s mode of controlling inflation is through rate hikes and quantitative control of major markets, which hinders the price direction of crypto-assets.
The crypto market correction occurred due to the Fed’s recent increase in interest rates by 75 basis points last month.
Meanwhile, experts believe that another rate hike will see the crypto industry enmeshed in another bloodbath, which may be worse.
The Federal Reserve is not yet done with its measures to control inflation as there are indications of further interest hikes. Inflation appears stubborn and has evaded many of the Fed’s approaches as it continues its efforts to squash it.
Despite no announcement from the Fed, crypto investors are in for another rollercoaster should the regulator press the hike button.
Price data has shown that the flagship digital token, Bitcoin, has dropped roughly 10% or more after all the Fed meetings on interest rates. However, the data may not indicate the upcoming market reactions in the case of a future hike.
Still, experts believe investors should brace themselves for possible volatility as the sentiment is not all bullish. Over the past two months, the value of crypto assets has plummeted due to the Fed-induced hikes.
Overall, further rate hikes will not favor the crypto industry as digital assets have struggled to gain momentum this year. And investors are pulling out due to the steady rise in interest rates.
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