A closely followed economist believes that the next update to the inflation data could significantly alter the course of crypto markets.
Alex Kruger mentions inflation as the number one concern for the Federal Reserve to his 117,100 followers on Twitter.
The economist asserts that the Fed has turned hawkish, contemplating multiple rate hikes and scaling back asset purchases to combat inflation.
Kruger points out that if the Fed carries out its plan, the lack of liquidity could negatively impact the crypto markets.
Crypto assets are at the furthest end of the risk curve.
Just as they benefited from extraordinarily lax monetary policy, they suffer from unexpectedly tight monetary policy, as money shifts away into safer asset classes.Alex Kruger
In light of Bitcoin’s (BTC) drop of over 40% since its all-time high, Kruger believes the latest consumer price index (CPI), a measure of inflation, may dictate the next cryptocurrency market cycle.
Wednesday we’ll have the US inflation data… If CPI surprises on the downside, expect prices to pop and trend for a while. If CPI surprises on the upside, ‘lights out,’ BTC is going into the $30,000. Tradfi [traditional finance] will make sure of it.
If the number comes in line with the forecasts, at 7.1%, hard to tell. Would make sense for bears to attempt to break the lows, fake breakout, and a rabid rally to ensue given the chart.
That said, crypto will follow Bitcoin, and Bitcoin will follow stocks.
Kruger also says that he believes the Fed is prepared to see market drawdowns just to keep inflation under control.
The Fed is saying it is willing to prick the bubble. The bear case is they do. The bull case is inflation starts to consistently surprise on the low side, and they don’t need to.
Inflation is everything.
Via this site