The world is moving through an unprecedented time. According to the consumer price index CPI, inflation is higher than in the last four decades. Inflation is affecting every corner and market of the world. Many top economists fear another economic crisis like 2008, but that is too early to guess. Committees and governments are trying their hard to avoid economic devastation.
The FED held a meeting on Wednesday to slow down inflation. The meeting comes to an end with another interest rate increase. This is the fourth time the FED has increased the interest rate to ensure economic stability. However, the market does not respond well to these increasing interest rates. Especially the crypto market has lost so much worth in the last year due to this.
What Consumer Price Index (CPI) tells?
The CPI report rose 8.2% in September 2022 compared to September 2021. This is slightly higher than what top economists figure out, 8.1%. The CPI rose more than 0.4 in August 2022. Another feature of the CPI is the core CPI, which is considered the most authentic indicator of price pressure, and most Policymakers and investors follow this.
The core CPI rose by 0.6% in August 2022 and by 6% from last year. It has been the highest core CPI increase in the last forty years. Last year’s health insurance increased by 28%, and groceries increased by 13%. Additionally, the price of rent increased by 7.2% in one year.
To counter the CPI indication (inflation), many central banks around the world have increased the interest rate five times in the last year. The aim of increasing the interest rates is to bring inflation down to 2%. However, according to economists, inflation has not hit its peak, and the next 12 to 18 months are essential for the market.
How will the FOMC meeting impact the crypto market?
The FOMC meeting minutes show that the interest rate would go up further until inflation came down. This is the fifth time the FED is increasing the rate, and it hits the crypto market badly every time. The FOMC meeting in March, May, and June saw a 10% decrease in the bitcoin prices. However, the July FOMC meeting does not affect the prices that much.
Investors thought the FOMC meeting would not affect the crypto prices anymore, but the recent interest rate saw a sharp decline in the prices of many top cryptocurrencies. Bitcoin, the top cryptocurrency, price dropped down below $19k while Ethereum was closer to $1300, and the rest of the market followed suit.
What do you need to do as a crypto investor?
Now the question is what the crypto investors need to do with the falling prices of top cryptocurrencies? If you are a long-term crypto investor, then the moves of FED, corporate companies, and CPI indications should not bother you. Because they are for the time being, and crypto will be there. The Crypto market has lost 50% of its price over the last year and may regain its position very soon.
Given the unpredictable and volatile nature of the crypto market, no economic indicator can predict the real future of crypto. In such devastating economic conditions, you should use 5% of your total investment in crypto. You should keep an eye on the market because bigger crises bring bigger opportunities.
Final thoughts
CPI indicators tell a story of despair and fear. The whole world is going through higher inflation. Many economists believe there is much to come in the next one and a half years. The FED is constantly increasing the interest rates to avoid further inflation, which is also affecting the crypto market. However, unlike the traditional markets, it is complicated to predict the crypt’s future.
