Key points:
The cryptocurrency market responded positively to Wednesday’s Consumer Price Index (CPI) report and reduced the prospects for a trade war between the United States and China. In this case, the demand for alternative hedging tools will usually weaken, but Bitcoin (BTC) Nearly $109,000, while Ether (eth) 3% return, trading above $2,800.
While it’s too early to call it a trend, the crypto market seems to be somewhat different from traditional assets. The S&P 500 also gave part of its early earnings, originally announced by U.S. President Donald Trump New trade agreement with China.
Under the deal, both countries restore tariffs to February 2025 levels, alleviating tensions and eliminating retaliation taxes. However, stock market performance shows that investors are overwhelmed while the move significantly reduces the risk of economic impact.
Bitcoin, benefit from potential liquidity injection
The 2.4% annual inflation rate reported by the U.S. Consumer Price Index provides some relief, especially in the case of ongoing global trade war-driven price increases. Often, these developments will boost confidence in stocks and strengthen the dollar, but investors remain upset about the growing U.S. government debt.
The dollar index (DXY) fell to its lowest point in seven weeks, indicating that investors are retreating from the dollar. This decline usually indicates a decline in confidence in the Fed’s ability to manage economic risks and has heightened concerns about the country Financial Trajectory. In response, market participants are redistributing other major fiat currencies.
JPMorgan Chase CEO Jamie Dimon reportedly highlighted the risks posed by private credit, which could become problematic during the recession. According to CNBC, Dimon believes that the United States is still vulnerable to recession, especially when jobs “will be a little lower” and upward inflationary pressures remain.
Joe Brusuelas, chief economist at RSM Tell Yahoo’s finances are “we don’t really see a lot (if any) from tariffs.” In short, the lack of strong economic growth remains a major concern for investors. The longer the U.S. Federal Reserve holds current interest rates, the greater the possibility of a recession.
According to the CME FedWatch tool, the futures-based probability of target interest rates for futures-based fund funds has shifted significantly over the past month. Now, the market means that interest rates will reach 3.75% or higher by December, up from the 42.5% chance a month ago.
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Higher interest rates have a double negative impact on the economy when increasing the cost of issuing and refinancing debts, whether individuals, companies or governments. Additionally, interest rates that exceed expected inflation tend to weigh risky assets as fixed income earnings are attractive.
The initial signs of decoupling from the stock market indicate that investors are seeking higher returns, which shows that the U.S. government is ready Increase debt ceiling. Therefore, cryptocurrencies are considered to benefit from this environment regardless of the economic growth outlook, as traders expect central banks to increase liquidity.
This article is for general information purposes and is not intended to be considered legal or investment advice. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent Cointelegraph’s views and opinions.
