crypto markets While we continue to feel the pressure of the tension between Russia and Ukraine from time to time, the inflation data coming from the US side this week may create a new environment of uncertainty. The January “personal consumption expenditures index (PCE)” will be announced next Friday. What makes the data more likely to affect the markets is interpreted as the Federal Reserve’s preferred inflation indicator.
With the sentiment pointing to “extreme fear”, a strong inflation data may further unsettle markets where Russia-Ukraine tensions are starting to boil.
Rising inflation will also create more room for the Fed to raise interest rates, which will reduce liquidity in the markets and reduce investment in risk-focused assets such as stocks and cryptocurrencies.
Crypto Markets Move In Alignment With Stock Markets
By 2021, as institutional interest in cryptos grew, the market began to be traded more than stocks, especially tech stocks. For example, Bitcoin (BTC)the tech-heavy Nasdaq index is down about 18% this year compared to the nearly 16% drop.
On February 10, stronger-than-expected US consumer price data caused crypto market capitalization to drop by nearly $80 billion in thirty minutes. Then the market doubled its losses in the next two days.
Recent volatility has cost crypto, particularly Bitcoin, a potential hedge against inflation.
Is There a Risk of Inflation This Week?
According to the news of Yahoo Finance, which is based on Bloomberg data, the PCE index is expected to grow by 6% in January, the fastest increase in nearly 40 years. A stronger-than-expected reading could likely shake the markets.
The crypto market has lost more than $100 billion this month due to concerns in Russia. While it is currently showing early signs of a recovery, it is still vulnerable to further shock.
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.