Next week is expected to be quite volatile for cryptocurrency investors, who are preparing for two major economic events that are yet to happen in 2023.
The cryptocurrency market is gearing up for a big week ahead as all eyes are now on the upcoming CPI news.
Bitcoin’s recent rise from $27,000 to over $43,000, initially due to anticipation of US ETF approvals, also appears influenced by falling interest rates in major bond markets, which suggests a possible change in central bank policies towards the end of rate increases and the easing of monetary measures.
Crypto Market Set for Volatile Week
The focus of the economic agenda is on Tuesday’s release of the US consumer price inflation report for November. Predictions suggest that this report will indicate a continued slowdown in the annual CPI.
In addition, the Federal Reserve’s last meeting of the year will be held on Wednesday, where it will declare its decision on rates. The consensus among investors is that the central bank will likely maintain the status quo, as there is a general belief that the Federal Reserve has concluded its monetary tightening measures.
Taking these factors into account, the coming week is expected to cause significant fluctuations for Bitcoin, with effects that could be felt for several months.
US CPI Report: December 12
Next week’s US CPI inflation data is gaining importance, especially as investors increasingly anticipate a rate cut by the Federal Reserve in March.
According to forecasts, the consumer price index is expected to show a slight increase of 0.1% for the month, after stagnation. figure in October. The projected annual inflation rate is expected to be around 3.1%, a slight decrease from the 3.2% rate reported the previous month.
If inflation data reveals a rate of 3% or lower, which would be colder than expected, it will likely fuel further hopes of a rate cut. Conversely, if the inflation rate rises unexpectedly, it could force the Federal Reserve to continue its efforts to combat inflation.
If the CPI data shows inflation of 3% or less, indicating that inflation is slowing more than expected, it could raise expectations for a cut rate. This scenario may lead to a surge in the cryptocurrency market as investors could look for higher returns on riskier assets like cryptocurrencies.
FOMC Meeting: December 13
At its December meeting, the FOMC is likely to keep rates unchanged at 5.25% to 5.50%. Despite earlier hints of possible further tightening, the market consensus now leans towards an end to rate hikes.
Attention is focusing on when the Fed could begin cutting rates, with some expecting a cut as early as May 2024, although the Fed may be cautious in signaling such moves due to lingering inflation concerns.
The focus of the December meeting will be on any hint of future rate cuts as inflation is still expected to remain above the 2% target until at least 2025. This may not have any impact on the bond market. cryptocurrencies.
However, any hint of rate cuts could lead to a more dovish monetary policy outlook. Lower interest rates generally reduce the attractiveness of yield-producing assets, making riskier investments, such as cryptocurrencies, more demanding.
By Audy Castaneda
