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Despite the pessimistic macroeconomic expectations, several of the industry's foremost analysts regard the recent macroeconomic-driven crypto market meltdown as an excellent overall indication.
This month, the crypto community is focusing on three critical dates that might significantly influence the trajectory of the cryptocurrency market and the broader financial climate in the United States in 2018.
The monthly Consumer Price Index (CPI) and inflation-related statistics will be made public on July 13. On July 26-27, a decision will be made over whether to increase interest rates further. On July 28, the Gross Domestic Product (GDP) estimates for the second quarter of 2022 will indicate if the United States is in a technical recession.
Micahel van de Poppe, CEO and creator of the crypto consulting and educational platform EightGlobal, informed his 614,300 Twitter followers on July 4 that “all eyes will be on the CPI statistics next week,” adding positive expectations for Bitcoin if its price rises beyond $20,000.
The Crypto Academy’s co-founder, known on Twitter as ‘Wolves of Crypto,’ advised his followers to keep a watch out for the date, adding that a lower-than-anticipated CPI “may be the impetus for a dead cat bounce” for Bitcoin.
“All eyes on CPI numbers on July 13. If CPI comes in lower, that will catalyze a dead cat bounce.”
CPI is one of the benchmarks for monitoring the progression of inflation since it measures the average change in consumer prices based on a representative basket of goods and services for the household.
Inflation might harm the cryptocurrency market if people are forced to spend more than previously to survive.
Bitcoin was created during high inflation following the 2008 Global Financial Crisis and was marketed as an inflation hedge due to its fixed supply and scarcity. However, cryptocurrency has performed similarly to traditional tech stocks in recent years, making it less inflation-proof.
The following planned publication of the CPI by the U.S. Bureau of Labor Statistics is due on July 13, 2022.
According to Trading Economics, the current estimate for June’s CPI inflation rate is 8.7 percent, a small increase from May’s 8.6 percent.
After increasing interest rates by 75 basis points in June, one of the most dramatic monthly hikes in the past 28 years, the Federal Open Market Committee (FOMC) is anticipated to raise rates further at its meeting later this month.
The Federal Reserve and the U.S. Central Bank employ interest rate increases as one of their key instruments to contain inflation by slowing the economy. Increasing interest rates result in higher borrowing expenses, discouraging consumer and company spending and lending.
It can also exert downward pressure on the values of higher-risk assets, such as cryptocurrencies, since investors can begin to earn respectable returns simply by placing their funds in interest-bearing accounts or low-risk investments.
This month, the FOMC is anticipated to settle between a 50 or 75 basis point increase. Charlie Bilello, founder, and chief executive officer of Compound Capital Advisors, gambled on the more significant sum.
The U.S. Bureau of Economic Analysis (BEA) will announce an advance estimate of the U.S. gross domestic product (GDP) for the second quarter of 2022 on July 28.
After recording a -1.6 percent GDP decrease in Q1 2022, the GDPNow tracker of the Atlanta Federal Reserve now anticipates a -2.1 percent GDP decline in Q2 2022.
The United States would enter a “technical recession” if its GDP fell for the second consecutive quarter.
On the verge of a recession, will Bitcoin withstand its first global economic downturn?
Should the United States economy officially enter a recession, which is predicted to occur in 2023, Bitcoin would experience its first-ever full-fledged recession and is likely to see a continuation of its drop alongside tech stocks.
Despite the grim macro expectations, several of the industry’s foremost experts consider the recent macro-driven crypto market meltdown as a good indication for the sector as a whole.
Erik Voorhees, the co-founder of Coinapult and CEO and creator of ShapeShift, a crypto specialist, stated that the current crypto meltdown is “least worrying” since it is the first crypto crash caused by macro issues outside of crypto.
Qiao Wang, a core contributor to Alliance DAO, made comparable remarks to his 131,200 followers, adding that this was the first cycle when an “exogenous reason caused the primary bear case.”
“People, who are worried about crypto because of macro realize how bullish this is, right?”
“This is the first cycle where the main bear case is an exogenous factor. In previous cycles, it was endogenous, e.g., Mt.Gox (2014) and ICOs (2018), it was endogenous,” he explained.