The latest Consumer Price Index (CPI) report showed inflation running hotter than expected in October, exceeding economist forecasts. However, the crypto market appeared unfazed, with Bitcoin holding steady at around $26,700.
CPI rose 0.4% month-over-month, outpacing predictions. But crypto traders seem unconcerned by persistent inflation, instead anticipating a policy change from the Federal Reserve as rate hikes start to cool the economy.
With interest rates above 5%, significantly higher than inflation, the Fed is likely nearing the end of its tightening cycle. Further hikes could risk going too far as mortgage rates and borrowing costs already hit multi-decade highs.
The muted crypto reaction signals traders expect the Fed to stop raising rates soon despite hot inflation data. As the central bank emphasized, surging Treasury yields will also tighten financial conditions without more hikes.
Looking ahead, Fed rate cuts are projected in 2024. This policy pivot, combined with bullish crypto catalysts like the Bitcoin halving and spot BTC ETFs, could align macro conditions favorably for crypto once again.
Just like in early 2019 when the Fed halted hiking, the end of tightening could spark the crypto market’s next major rally. For now, traders appear to be positioning for the Fed’s inevitable direction change as inflation holds high.
