Markets are on high alert ahead of US inflation data set to be released on Tuesday, which could set the stage for crypto’s next rally.
That’s according to Alice Liu, head of research at CoinMarketCap, who said that the Consumer Price Index, or CPI, could “lock in expectations for a September Fed rate cut, which is generally bullish risk-on assets like crypto.”
Low rates usually incentivises investors to tap into riskier bets like digital assets.
The CPI figures “could potentially trigger Bitcoin’s next all-time high,” Liu said in comments shared with DL News.
The new data comes as Bitcoin trades around $118,500 after surging past $122,000 over the weekend, reversing last week’s losses, with Ethereum gaining over 20% in the same period.
The US Bureau of Labor Statistics publishes the CPI figures every month. It is a key economic metric closely followed by policymakers, businesses, and markets, and is seen as one of the most important macro events this month for both Wall Street and digital assets.
A lower CPI figure could solidify expectations for the Federal Reserve to cut interest rates in September while a hotter inflation read may hit Fed rate cut chances and weigh on crypto markets.
The new numbers are “poised to be one of the most critical macro data releases in recent memory for risk assets,” analysts at Presto Labs wrote in a Tuesday note to investors.
Several analysts have said they anticipate that crypto prices will soon hit record highs.
Bitwise, Bernstein and Standard Chartered have all predicted that Bitcoin’s price will hit $200,000 before the end of the year.
Even so, Liu notes that Bitcoin and Ethereum options trades have surged to “near yearly highs” of $43 billion and $14 billion respectively.
“This high open interest from derivatives traders could amplify volatility, so be cautious of short squeezes, sudden liquidations, or sharp price moves,” Liu said.
The Fed has held its benchmark rate at 4.25%–4.50% all year. Markets are pricing an 84.4% chance of a September cut, according to the CME FedWatch tool. That’s up from the beginning of August when traders put the chances at 40%.
Lance Datsko-Luo is DL News’ Ukraine-based markets correspondent. Got a tip? Email at lance@dlnews.com.