For the crypto community, there are three important days this month that could have a profound impact on the development of the crypto market and the macroeconomic environment in the US as a whole this year.
On July 13, the monthly consumer price index (CPI) and data on inflation will be published. On July 26 and 27, it will be decided whether to raise interest rates further, and on July 28, the estimates of the gross domestic product (GDP) of the United States for the second quarter of 2022 will show whether the country is technically in a recession.
July 13: Inflation and consumer price index data
Michaël van de Poppe, CEO and founder of the crypto consulting and education platform EightGlobal, said on Twitter on Monday that “all eyes are on the consumer price index data over the next week”. He also gave bullish forecasts for Bitcoin (BTC) if it should climb above the $ 20,000 mark.
Blurry chart, but would be looking at $28K for #Bitcoin, if there’s a chance that $20K can be flipped (and in between I’d be monitoring $23K).
All eyes on the CPI data next week and the FED, but would make sense. pic.twitter.com/pcWwEmkoHT
– Michaël van de Poppe (@CryptoMichNL) July 4, 2022
The co-founder of the Crypto Academy with the Twitter name Wolves of Crypto said that one should mark this date in calendar and he added that a lower smoking price index than expected “could be the catalyst for a dead cat bounce” for Bitcoin:
“On July 13, we should focus on the consumer price index figures. If the consumer price index is lower, that could be the catalyst for a dead cat bounce”.
The consumer price index is one of the measuring instruments with regard to the development of inflation. The average change in consumer prices is measured on the basis of a representative basket of household goods and services.
Further rising inflation could affect the demand for cryptocurrencies, as consumers will have to spend more money to make ends meet than before.
Interestingly, although Bitcoin was developed in the midst of high inflation after the 2008 global financial crisis and is touted as a protection against inflation due to its fixed supply and scarcity, in recent years the cryptocurrency has developed in a similar way to traditional tech stocks and has not proven to be immune to inflation.
The next scheduled publication of the consumer price index in the USA is scheduled for July 13, 2022.
According to Trading Economics, an inflation rate of 8.7 percent is currently expected for June, which is therefore slightly higher than in May (8.6 percent).
July 26 and 27: Interest rate hike by the US Central Bank
The increase in the key rate by 75 basis points in June was one of the highest monthly increases in 28 years. Now it is expected that the key rate will continue to rise after the meeting of the US Central Bank’s Open Market Committee at the end of this month.
Interest rate hikes are an important tool of the US Central bank to get inflation under control by slowing the economy. Higher interest rates lead to an increase in the cost of borrowing, which can discourage consumers and businesses from spending and borrowing.
This can also put downward pressure on high-risk investments such as cryptocurrencies, as investors can already earn decent returns by parking their money in interest-bearing accounts or low-risk investments.
This month, the US Central Bank’s open market is expected to decide whether it will raise interest rates by 50 or 75 basis points. Charlie Bilello, founder and CEO of Compound Capital Advisors, believes in a stronger increase.
Fed rate hike expectations at next 4 FOMC meetings…
-July: 75 bps hike to 2.25%-2.50%
-Sep: 50 bps hike to 2.75%-3.00%
-Nov: 50 bps hike to 3.25%-3.50%
-Dec: 25 bps hike to 3.50%-3.75%
– Charlie Bilello (@charliebilello) June 28, 2022
July 28: Are we in a recession?
On July 28, the US Economic Analysis Agency will estimate the gross domestic product of the United States for the second quarter of 2022 and publish a report on it.
After a GDP decline of 1.6 percent in the first quarter of 2022, the Atlanta Federal Reserve’s GDPNow tracker now expects GDP growth to decline by 2.1 percent in the second quarter of 2022.
A second consecutive decline in GDP for the second quarter would mean that the US is in a “technical recession”.
In this context: On the Brink of Recession: Can Bitcoin Survive Its First Global Economic Crisis?
If the United States economy is officially in recession, which is expected for 2023, Bitcoin is on the verge of its very first full recession and is likely to experience another decline along with tech stocks.
Is there hope?
Despite the gloomy macro forecasts, some of the leading crypto experts see the recent slump in the crypto market as a positive sign for the industry as a whole due to the macro environment.
Crypto expert Erik Voorhees, co-founder of Coinapult and CEO and founder of ShapeShift, said that the current crypto crash is “of least concern” to him, as it is the first crypto slump due to macro factors outside the crypto economy.
Prior crashes were all bubble blow offs, unrelated to the larger world.
This is the first crypto crash which is clearly exogenous; a result of macro factors outside of crypto.
Maybe this is why, of all the crashes, this one has been least worrisome to me.
– Erik Voorhees (@ErikVoorhees) July 1, 2022
Qiao Wang, a major player in the Alliance DAO, expressed a similar opinion on Twitter, stating that this is the first cycle in which the main reason for the bear market is an “exogenous factor:
“The people who are worried about crypto because of the macroeconomics know how bullish that actually is, right?”
“This is the first cycle in which the main reason for the bear market is an exogenous factor. In previous cycles, the causes were endogenous, for example, Mt.Gox (2014) and ICOs (2018),” as he explained.