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| By Alex Benfield |
Today is another Consumer Price Index report day, an event that tends to reverberate throughout markets as they speculate on further action from the Federal Reserve.
The last few CPI numbers have been very high, with last month’s rate coming in at over 9% year-over-year inflation.
The July CPI was expected to be 8.7% — far from low inflation, but that would still mean a slight reduction from the June numbers and could possibly show that the Fed’s hawkish actions are starting to take effect.
Well, the official CPI numbers came in at 8.5%. Year-over-year inflation hasn’t been this low since March!
The markets immediately started celebrating.
This is the first sign that the drastic actions from the Fed — the end of quantitative easing and the most drastic rate hikes in over 40 years — are starting to show results.
That means we are one step closer to the inevitable Fed pivot, the moment they decide enough pain is enough and end the streak of rate hikes.
The crypto market has been waiting on any sort of good news that might lead to a market spike, and this could very well be the catalyst needed to push through some important resistance levels.
Take Bitcoin (BTC, Tech/Adoption Grade “B+”) for example. It’s been struggling mightily to break through resistance at $24,000 — that level has stopped BTC in its tracks throughout this recent market recovery.
This might be Bitcoin’s best chance to break through.
After $24,000, there’s barely any obvious resistance on Bitcoin’s chart until $28,000. Meaning if BTC can cross and hold $24,000, there’s nothing stopping it from moving higher.
BTC is up about 4% today on the news of lower inflation and is sitting on the cusp of $24,000. If it can keep climbing over the next 48 hours, it could extend this rally.
Here’s BTC in U.S. dollar terms via Coinbase (COIN):
Ethereum (ETH, Tech/Adoption Grade “B+”) is up over 7% so far today and has officially set a new rally high … it’s finally trading above $1,800 and in the zone of resistance between $1,800 and $2,200.
If it can keep going — possibly aided by a successful Goerli testnet merge tonight — it has a chance to break above this resistance.
ETH has acted as the de facto market leader throughout this entire rally that started in June. If there has ever been a time for Ethereum to shine, it’s right now while it heads into perhaps the biggest tech upgrade in crypto history.
Whatever direction Ethereum goes over the course of the next few weeks, the entire market will likely follow.
Here’s ETH in U.S. dollar terms via Coinbase:
Notable News, Notes and Tweets
- This week there was a crackdown on Tornado Cash, an Ethereum transaction scrambler that’s caused quite an uproar over digital rights.
- CPI came in under expectations for a change, although the messaging has been a bit skewed.
- In case you missed it, the IRS has a cool new $80 billion budget and can hire up to 87,000 new agents to enforce the tax code. While the White house has said that the new agents won’t be targeting anybody who makes less than $400,000 a year, it’s important to note that the Senate voted on an amendment that would limit the new agents to only target those who make $400,000 a year — a salary that only 1% of the U.S exceeds. The vote did not pass.
What’s Next
The crypto market has unfortunately been so closely tied to the Fed’s actions and response to the 40-year high inflation that no good news has been able to send this market higher.
That is, until now.
The Merge is absolutely one of the biggest events in all crypto history. If it had timed up under different market conditions, it’s hard to say just how high ETH prices might be right now.
That said, the Merge might be the one catalyst this market needs to run higher despite a shaky macro backdrop.
We’ve been saying for a while that crypto prices are sitting just under some heavy resistance levels, and the ones BTC and ETH are facing now are truly a test for the broad crypto market.
If Ethereum and Bitcoin can climb above their current levels, they might be able to definitively lock in June 18 as a bear market bottom, raise the floor prices of any further market dips and potentially spark another retail flood back into the market.
And that could all happen before a Fed pivot, I should add.
When that Fed pivot comes, we really expect the fireworks to go off. The higher prices can climb before that date just makes the eventual market boom much more exciting.
Stay tuned in to Weiss Crypto Daily to follow along with how this rally develops.
Best,
Alex
