Bitcoin, Ethereum and XRP resumed their declines on Thursday following new U.S. inflation data that raised expectations the Federal Reserve would hike rates at the next meeting. The September 15-16 FOMC meeting could be weighed on risk assets on the crypto market.
Bitcoin, Ethereum, XRP Witness Major Pullback
Economists had forecast a 0.4% increase in the U.S. Bureau of Labor Statistics’ Producer Price Index (PPI) this month, which is what it did. Producer prices rose 5.4% on an annual basis, just a bit higher than the consensus of 5.3%.
In the meantime, the core PPI reading ticked up 0.2% month-on-month, reversing a 0.3% drop, and was unchanged on the year, as had been forecast. Despite some cooling of underlying price growth, the report said inflationary pressures are still high.
The major crypto-currencies have seen selling following the inflation report. Bitcoin price dropped around 2.7% in the last 24 hours and currently is trading at $77,300. XRP fell about 3.9% to just over $1.37, while Ethereum tumbled around 2.1% to $2,450, trailing both Bitcoin and Ethereum.
The 1-hour BTC price chart also showed signs of increased bearish momentum. Bitcoin made multiple attempts to test the $79,000-$80,000 resistance zone without any success and eventually traded below the $77,500 support line, making a new lower low. The current sharp red candle indicates that sellers took control since the release of inflation data and is now increasing the potential for further declines if buyers are unable to support the price.
Fed Odds Rise After Inflation Report
Markets are now turning a greater focus on the Federal Reserve’s Sept. 15-16 policy meeting. After the PPI was released, CME FedWatch had traders pricing in a 74% chance of the Fed hiking rates to a 3.75%-4.00% range, down from 80% prior to the release, and a 26% chance of a 3.50%-3.75% range, up from 20%.
When interest rates are high, it tends to be more negative for cryptocurrencies, as a higher interest rate would make the U.S. dollar stronger and Treasury yields higher, lowering demand for risk assets. Friday’s CPI report is also on the market’s radar as it could further impact expectations on the Fed’s decision, and drive more selling pressure on Bitcoin, Ethereum and XRP or ease.
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