The crypto-currency market is collapsing, will the Fed amplify the crisis?

BTC is down over 6% in the last 24 hours and is currently trading at $21,934. Ethereum is trading at $1,751, down more than 7% in the past week.

A less-than-expected 8.5% annual increase in the CPI revealed a cooling in inflation. However, with Fed officials taking a stance hawk, the crypto-currency market may see new lows.

What top Fed officials are saying

Fed officials are taking a hawkish stance on next month’s interest rate hike. Fed President James Bullard has given every indication of another 75 basis point hike. He has made clear his intention to put significant downward pressure on inflation.

Neel Kashkari, president of the Minneapolis Federal Reserve, is one of the Fed’s most dovish. However, even he expressed his urgency to control “the very, very high inflation“.

How the Fed can influence the crypto-currency market

CPI is a strong indicator of inflation in the economy. Higher inflation is usually followed by quantitative tightening by the Federal Reserve as a measure to control inflation.

A three-quarter percentage point increase in interest rates in June caused a sharp drop in the crypto-currency market. Bitcoin had its worst financial quarter in more than a decade. However, more high inflation data the following month did not have a bad impact on the market.

The main reason was the expectation that inflation would start to cool. In addition, U.S. GDP has shown negative growth for two consecutive quarters. This meets the criteria for a technical recession. Many experts expected the Fed to reverse its hawkish stance, given the macroeconomic conditions.

However, a larger than usual hike in September could cause a crisis, as it did in June.