Headline inflation: 5.1% (vs 3% Fed target). Core PCE: 3.4% expected by year-end. Oil and commodity supply shocks tied to geopolitical tensions are keeping inflation sticky. This is why the Fed is on alert for September hikes.
Bitcoin and Ethereum produce no yield. When the Fed raises rates, bonds and savings accounts offer 5%+ returns, making crypto less attractive. This is why institutions are selling ahead of potential rate hikes.
In 2022-2023, as the Fed raised rates from 0% to 5.25%, Bitcoin fell 65% and Ethereum fell 70%. Rising rates are historically bearish for crypto. Lower rates fuel bull runs. This is the macro backdrop to understand.
CPI comes in below expectations (under 3%). Fed signals no September hike. Crypto reverses sharply upward. Bitcoin could rally toward $68K, Ethereum toward $2,100+. This is the bull case.
CPI comes in hot (above 3.4%). Fed signals September rate hike. Crypto crashes. Bitcoin tests $60K, Ethereum tests $1,600. This scenario becomes more likely if geopolitical tensions escalate commodity prices further.
Monitor the August 12 CPI release at 8:30 AM ET closely. Position accordingly: bearish on a hot print, bullish on a soft print. The Fed's September decision will be the next major catalyst for crypto prices.
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