Key Takeaways
- The cryptocurrency market shows signs of a potential rally, influenced by recent US inflation data.
- Lower-than-expected Consumer Price Index (CPI) figures have increased the likelihood of Federal Reserve interest rate cuts.
- An upcoming meeting between Donald Trump and Xi Jinping could further impact market sentiment.
The cryptocurrency market is signaling a potential relief rally in the upcoming days. This optimism is largely fueled by the latest US consumer inflation report, which came in milder than anticipated.
Additionally, the market may find further support from the forthcoming Federal Reserve interest rate decision and ongoing diplomatic talks between Donald Trump and Xi Jinping.
Crypto Market Reacts to Inflation Data
The cryptocurrency market experienced an upturn today, October 24, with Bitcoin (BTC) seeing a notable surge and the total market capitalization of all digital assets reaching $3.73 trillion. Among the prominent gainers in the sector were Virtuals Protocol, Zcash (ZEC), Aster (ASTER), and Morpho (MORPHO).
This positive movement followed the release of the September Consumer Price Index (CPI) data by the Bureau of Labor Statistics. The report indicated that the headline CPI edged down to 0.3% in September, a decrease from 0.4% in August. The annual inflation rate also saw a slight rise from 2.9% to 3.0%, falling below the median forecast of 3.1% from analysts.
The closely observed core CPI, which excludes volatile food and energy prices, also showed improvement. It declined from 0.3% to 0.2% on a monthly basis and from 3.1% to 3.0% year-over-year, both figures being more favorable than expected by market observers.
💡 Economists suggest that these encouraging inflation figures increase the probability of the Federal Reserve implementing interest rate cuts during its upcoming meeting. Market sentiment points towards a high likelihood, with odds of a cut reaching 97% on Polymarket.
Historically, cryptocurrency prices tend to perform well during periods when the Federal Reserve is actively cutting interest rates. This correlation was evident earlier this month when Bitcoin’s price reached a new record high, occurring shortly after the Fed’s initial rate cut of the year.
Impact of Trump and Xi Jinping Meeting
Another significant factor that could potentially catalyze a further rally in the crypto market is the highly anticipated meeting between Donald Trump and Xi Jinping. This summit is scheduled to take place during the APEC meeting in South Korea next Thursday.
The primary objective of this meeting is to de-escalate tensions between the United States and China and potentially forge a new trade agreement. Such an accord would be instrumental in preventing an escalation of the ongoing trade war, a development that would likely benefit both stock markets and cryptocurrencies.
⚡ A reduction in trade war escalation could also lead to a decreased likelihood of further inflationary pressures. This is particularly relevant given the heightened rhetoric between the two nations in recent weeks.
The threat of a 130% tariff on Chinese goods, proposed by Trump, had previously contributed to a crypto market downturn and significant liquidations amounting to $20 billion earlier this month. In response, China has alluded to implementing export controls on rare earth materials and initiated investigations into American companies like Qualcomm, alongside placing tariffs on American ships.
Expert Summary
The crypto market is poised for a potential upturn, driven by lower-than-expected US inflation data which boosts expectations for Federal Reserve rate cuts. The upcoming meeting between US and Chinese leaders also presents a significant, albeit uncertain, catalyst that could influence market stability. Investors are closely watching these macroeconomic developments for further direction.