Could extraordinarily elevated inflation numbers lead to a crypto market carnage this June?

  • Tomorrow’s update of US inflation numbers could lead the crypto and stock markets into a downward spiral this June.
  • The FUD around the inflation report might have already been factored into the market, but only if the hike is less than 9 percent.

After posting a short March rally, the crypto market is now back to erasing its profits. The past two days have seen over $170 billion wiped out from the market. Bitcoin (BTC) rose to highs of $48,000 this 2022 but is now trading at $40,000. BTC has also shed off 5.5 percent in the past day and pulled down the rest of the market with it.

Per several reports and insights, the worst is yet to come. With the surge in inflation rates, investors’ risk appetite has reduced marking the migration to more risk-aversive assets. Additionally, the Fed has further quantitative tightening plans to cut down market liquidity with interest rate hikes.

Crypto markets brace for carnage following inflation report

Arthur Hayes, CEO at BitMEX, is expecting a major bleed in the crypto market this June. As CNF reported, he expects the Nasdaq 100 to drop to 10,000 and below that month. Subsequently, Bitcoin and Ether will drop to $30,000 and $2,500, respectively by the end of June 2022. Here, Hayes cites the increased correlation between Bitcoin and the stock market.

Separately, on-chain data provider Santiment reports growing FUD in the crypto market, particularly on Ethereum. The resultant bearishness, it says, will likely present buy the dip opportunities to some:

There is a whole lot of #bearishness circulating in #crypto circles as market caps continue to drop following the incredible March. #Ethereum, in particular, has seen a ton of #FUD even prior to its price rally, and #buythedip opportunities may arise.

The “Putin price hike”

Furthermore, Russia’s invasion of Ukraine has had detrimental effects on the energy and food markets. The result, as White House secretary Jen Psaki reported on Monday, is “extraordinarily elevated” inflation numbers.

We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike. We expect a large difference between core and headline inflation, reflecting the global disruptions in energy and food markets.

Currently, the market expects an 8.4 percent surge in inflation numbers, the highest in four decades. However, there is the possibility that this figure could be higher, catalyzing an extended tantrum in both the stock and crypto markets. Market analyst Lark Davis tweeted:

Tomorrow’s bad inflation data could already be priced in after the warning from the White House, that is if it is only like 8.5 percent. But if it is anything over 9 percent, then we are probably heading lower as that is worse than the market expects. IMO.

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