Macro Impact On Crypto Markets!
Both crypto and US equities markets finished the last week with losses again. Bitcoin went down by over 3% compared to the previous week, closing at 18.696 on Sunday. ETH finished the week lower by roughly 3%. US Equities dropped by around 5% again, with NASDAQ closing at 10.867 and S&P closing at 3.693 last Friday. The further correction in prices was mainly fuelled by the outcome of the FED’s monetary meeting held on Wednesday 21st September 2022 and their more aggressive rate projections than expected.
As expected, the FED raised interest rates by another 0.75% and announced more tightening ahead. As a result, the target range for the federal funds rate stands now at 3.00–3.25%. The FED also stated that it would continue reducing the size of its balance sheet. The median projection among FED’s board members for a target range midpoint was at 4.4% at the end of 2022 and 4.6% at the end of 2023, substantially higher than the Bank’s June projections and higher than economists expected. We expect the inflation to soften before the next FED’s meeting on November 01–02nd 2022, when the committee will begin to moderate the pace of tightening with a 50 basis points increase, before pausing at a peak rate of around 4.50% in 2023.
The consumer price index in August stood at 8.3%, down from 8.5% in July 2022 (see chart below). The headline inflation rose 0.1% month over month, even with falling petrol prices. Core inflation rose 0.6% month over month, translating to an annual increase of 6.3%, up from 5.9% recorded during the previous period. The September inflation reading will be published on 13th October 2022 — the FED of Cleveland’s Inflation Nowcasting forecasts the CPI fell to 8.19%, down from 8.3% a month earlier, with Core CPI increasing further to 6.64% p.a. However, the strength of these trends for the US CPI remains to be seen.
US Fund Rates
Overall, the crypto market sentiment (measured by Crypto Fear & Greed Index) continues to stand at 21/100, indicating Extreme Fear, compared to a month ago when the Index stood at 28/100. The total crypto market cap had dropped by almost 4%, remaining below the $1 trillion mark. ETH dominance dropped by 5.8% while Bitcoin dropped by only 1.2% compared to the previous week.
WHAT TO WATCH FOR: The next monetary policy meeting for the ECB: October 27th, 2022; FED: November 01–02nd, 2022; The next US CPI release for September 2022 is scheduled for October 13th, 2022. The next US GDP update will be released on September 29th, 2022, followed by October 27th. 2022.