Bitcoin and other cryptocurrencies were in a state of suspense on Wednesday as traders anticipated the release of a crucial U.S. inflation metric. This data is expected to influence the Federal Reserve's decisions on interest rates, ultimately impacting the demand for digital assets.
Bitcoin Price Holds Steady
Over the past 24 hours, the price of Bitcoin remained flat at $26,100. This period has been characterized by a lack of volatility in the cryptocurrency market, with Bitcoin trading near the $26,000 level for about a month. As traders eagerly await the macroeconomic data release, they hope for a potential catalyst that can break Bitcoin free from its current stagnation.
Impact of Inflation Figures
Ranie Gule, an analyst at broker XS.com, emphasized that the impact of the released data on Bitcoin and other cryptocurrencies will hinge on the overall market volatility. Any significant surprises in inflation figures, whether higher or lower, will greatly affect the digital cryptocurrency market, particularly the price of Bitcoin.
Awaiting the U.S. Consumer-Price Index
Similar to the effect of key market indicators on traditional stock markets like the Dow Jones Industrial Average and S&P 500, cryptocurrencies are expected to experience movements following the release of the U.S. consumer-price index (CPI) for August at 1:30 p.m. Eastern time. While traders have mostly factored in the Federal Reserve's decision to hold interest rates steady next week, expectations remain uncertain for the central bank's November outlook.
If the August CPI reveals a higher-than-expected figure, it may increase pressure on the Federal Reserve to raise interest rates in November. Already at a generational peak due to the central bank's tightening of financial conditions last year, borrowing costs have been a contributing factor to the volatility in the crypto market. Higher risk-free returns resulting from elevated interest rates tend to dampen the demand for riskier assets like digital currencies. Therefore, the outlook for Federal Reserve policy remains a crucial factor influencing the cryptocurrency market.
Price Movements Beyond Bitcoin
While Bitcoin held its ground, other cryptocurrencies experienced minor fluctuations. Ether, the second-largest crypto, lost less than 1% and settled around $1,600. Altcoins, such as Cardano and Polygon, displayed mixed movements, with Cardano down 1% and Polygon slightly up by less than 1%. Memecoins, on the other hand, faced greater weakness, as Dogecoin and Shiba Inu each saw a decline of about 1%.
The release of the U.S. inflation data will likely serve as a turning point for the cryptocurrency market, potentially setting a new trajectory for Bitcoin and its counterparts.