Crypto Markets Feel the Effects of Rising Inflation
Inflation is accelerating, causing concerns among traders about the Fed’s potential response in light of macroeconomic uncertainty. The Personal Consumption Expenditures (PCE) price index, the Fed’s favorite inflation metric, rose 2.7% in August, contributing to a more bearish economic outlook.
The latest inflation figures have led to a decline in crypto markets, with Bitcoin falling below $110,000. On Friday, September 26, Bitcoin traded at $109,640, down 1.6% on the day, bringing the weekly decline to 5.5%. The likely catalyst for the negative price action is the latest inflation figures, which have raised concerns about the Fed’s policy.
Key Inflation Metrics and Their Impact on Bitcoin
According to the Department of Commerce, the PCE price index rose 2.7%, compared with a 2.6% increase in July. The core PCE index, excluding volatile components such as food and energy, increased 0.2% last month, while July’s reading was revised to 0.2%. While PCE inflation matched expectations, the acceleration contributed to a more bearish economic outlook.
The increase in inflation comes after the Federal Reserve made its first rate cut this year, citing fears over low employment and growth. With inflation accelerating, the Fed is less likely to stick to rate cuts, which will likely hurt high-growth assets such as Bitcoin (BTC), which thrive in a low-interest-rate environment.
Expert Insights on the Market Trend
According to Arthur Azizov, founder and investor at B2 Ventures, the acceleration in inflation is causing institutional investors to take profits. “Bitcoin’s drop below $109,000 is a sign that the market is overheated and moving into a slowdown phase. ETF inflows, being the main driver of this rally, have fallen by more than 50% in the past week, with just $930 million coming in compared to over $2 billion the week before,” Azizov told crypto.news.
Azizov added that $108,000 to $108,500 is now the key zone for Bitcoin. A fall below that support could send BTC down to between $90,000 and $95,000. The decline in crypto markets is a clear indication that investors are becoming increasingly cautious about the potential impact of rising inflation on the Fed’s policy.
As the crypto market continues to feel the effects of rising inflation, it is essential for investors to stay informed and up-to-date with the latest developments. For more information on the impact of inflation on Bitcoin and the crypto market, visit https://crypto.news/bitcoin-price-drops-after-pce-inflation-accelerates-institutions-take-profits/
- Fed’s favorite inflation metric, the PCE price index, up 2.7% in August
- Inflation was in line with expectations, but the metric rose compared to a month prior
- Institutions are now taking profits, says one industry expert
