The crypto community is focusing on three macro events in July in hopes of turning the tide in the crypto space
The crypto community is focusing on three key dates this month that could profoundly impact the trajectory of the crypto market and the broader U.S. macroeconomic environment this year.
On July 13, monthly consumer price index (CPI) and inflation-related data will be released to the public. July 26-27 will determine whether to raise rates further, while on July 28, the US gross domestic product (GDP) estimate for the second quarter of 2022 will tell us whether the country is in a technical recession.
July 13: Inflation indicators, CPI
Micahel van de Poppe, CEO and founder of crypto advisory and education platform EightGlobal, told his 614,300 Twitter followers on July 4 that “all eyes are on next week’s CPI numbers,” adding that if Bitcoin If the price of the coin rebounds above $20,000, then it is predicted to rise.
The Crypto Academy co-founder, who goes by the Twitter handle "Wolves of Crypto," told his followers to keep an eye on the date, adding that the lower-than-expected CPI "could be the catalyst for a Bitcoin dead cat rally."
“All eyes are on the July 13 CPI data. If the CPI falls, that will be the catalyst for a dead cat bounce.”
The CPI is one of the benchmarks for measuring the progress of inflation by measuring the average change in consumer prices based on a representative basket of household goods and services.
Rising inflation could affect demand for cryptocurrencies as consumers spend more than before to get by.
Interestingly, even though Bitcoin was born in the period of high inflation following the global financial crisis in 2008 and has been hailed as an inflation hedge due to its fixed supply and scarcity, the cryptocurrency has performed similarly to traditional tech stocks in recent years. Consistent, less inflation-proof.
The next CPI data is expected to be released by the U.S. Bureau of Labor Statistics on July 13, 2022.
The consensus forecast for June inflation, or CPI, is now at 8.7%, up slightly from 8.6% in May, according to Trading Economics.
July 26-27: Fed hikes rates
After a 75 basis point hike in June, one of the largest monthly increases in 28 years, further increases are expected after the Federal Open Market Committee (FOMC) meeting later this month.
Raising interest rates is one of the main tools the Fed uses to control inflation by slowing economic growth. Higher interest rates lead to higher borrowing costs, curbing spending and lending by consumers and businesses.
It could also put downward pressure on the prices of risky assets such as cryptocurrencies, as investors simply put their money into interest-bearing accounts or low-risk assets and start earning decent returns.
This month, the FOMC is expected to decide whether to raise rates by 50 or 75 basis points. Compound Capital Advisors founder and CEO Charlie Bilello forecast a 75 basis point hike.
July 28: Is the U.S. headed for a recession?
On July 28, the U.S. Bureau of Economic Analysis (BEA) will release the U.S. GDP forecast for the second quarter of 2022.
After a 1.6% decline in GDP in the first quarter of 2022, the Atlanta Fed's GDPNow tracker expects a 2.1% decline in GDP growth in the second quarter of 2022.
If GDP falls for a second straight quarter, the U.S. will enter a "technical recession."
If the U.S. economy is officially labeled as a recession (which is expected to begin in 2023), Bitcoin will face its first full-blown recession ever and could continue to fall along with tech stocks.
A silver lining?
Despite the bleak macro forecast, some crypto experts believe that the recent macro-induced crash in the crypto market is a generally positive sign for the industry.
Erik Voorhees, co-founder of Coinapult, CEO and founder of ShapeShift, and crypto expert Erik Voorhees said that, for him, the current cryptocurrency crash is "least worrying" because it is the first time it has been sponsored by someone outside the crypto space. Crash caused by macro factors.
Alliance DAO core contributor Qiao Wang made a similar comment to his 131,200 followers, noting that this is the first cycle in which the main bearish factor is “exogenous.”
“People who are worried about cryptocurrencies because of macro factors realize how bullish it is, right?”
“This is the first cycle where the main bearish factor is exogenous. Previous cycles were all endogenous, such as the Mt.Gox bankruptcy (2014) and ICOs (2018),” he explained.