Inflation hits 8.5%, crushing ‘transitory’ hopes – what about the crypto market?

Key Takeaways:

  • The latest CPI report places inflation at 8.5%
  • The highest inflation in over 40 years is not transitory
  • How will the crypto market respond?
Inflation, Inflation hits 8.5%, crushing ‘transitory’ hopes – what about the crypto market?
image from medium.com

YEREVAN (CoinChapter.com) – The latest consumer price index (CPI) report showed that inflation rose to 8.5% in March, the fastest 12-month pace since 1981. Energy, fuel oil, and commodities were the main contributors to the rising prices.

In detail, Fuel oil led the pack by rising over 70% year-over-year (YoY), compared to the previous month’s 43.6%. Meanwhile, the costs of commodities and energy rose 48% YoY, alongside used car prices, which surged 35% in the same timeframe

Bureau of Labor Statistics' latest inflation report. Source: bls.gov
Bureau of Labor Statistics’ latest CPI report. Source: bls.gov
Also read: WTF, Bitcoin! BTC price drops towards $38K after U.S. inflation hits four-decade high.

Highest in over 40 years

Some experts claim that the news was “not uniformly bad.” For example, the table above shows that the measure that strips out volatile food and fuel prices decelerated slightly from February and stood at -0.4%. Some economists and policymakers took that as a sign of “inflation cool-off.”

Gregory Daco, the chief economist at Ernst & Young, said the numbers “represent something of a peak,” albeit pointing out that it would be crucial to “watch whether core prices increase in the months ahead.”

Also read: Bitcoin beat" Apple, Tesla as most recurring buy asset for 2022.

Meanwhile, the Federal Reserve retired the term ‘transitory inflation’ long before the latest report. Treasury Secretary Janet Yellen remarked, “I am ready to retire the word transitory. I agree that that hasn’t been an apt description of what we are dealing with.”

Experts at crypto analytical platform Ecoinometrics pointed out the similarities between the current inflation growth rate and the stagflation in the ’70s.

Also read: BitcResearch'son spreads as BTC tests $43k support.

“Bonds down… stock market down… that doesn’t smell good for the 60/40 portfolio,”

said Nick, analyst at Ecoinometrics.

That raises anticipations that investors would seek safety elsewhere in the market. But is Bitcoin or similar crypto-assets the answer? The market is confused.

Crypto market corrects amid the uncertainty.

Arcane Research called the crypto market’s reaction to the ongoing market turmoil an “emotional rollercoaster” in its latest weekly report, saying that crypto investors don’t have a clear idea of their options.

The report revealed that for the third time in 2022, the crypto market sentiment shot up to the “greed” area, only to fall back into “fear” territory shortly after.

Fear and greed index (FGI) dropped to "extreme fear."
The fear and greed index (FGI) dropped to “extreme fear.”

In detail, the Crypto Fear and Greed Index (FGI) is one of the ways to gauge market sentiment within the cryptocurrency space. The FGI is a daily snapshot of the general market “emotions” within the crypto sector.

Also read: Bitcoin uptrend underway: 3 reasons why.

Moreover, the report revealed a bearish outlook from options traders.

The high volatility skew suggests that option traders are long-term bearish, but the low implied volatility indicates they are hesitant to take directional bets. […]The volatility skew is the relative difference between prices of put and call options with otherwise similar characteristics.

Historically for bitcoin, call options have been more expensive than put options, generally giving bitcoin a negative volatility skew.

concluded the report.
Total crypto market cap. Source: TradingView.com
Total crypto market cap. Source: TradingView.com

However, the rising inflation might have spurred the crypto sector’s upside attempts as the digital assets started to decouple from the risk markets. As a result, the overall crypto market cap recovered to $1.83 trillion in the European session on Apr. 13, a 3% advance since the CPI report release.

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Inflation, Inflation hits 8.5%, crushing ‘transitory’ hopes – what about the crypto market?

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