• Cryptocurrency prices rose on January 4, 2023, in anticipation of the Federal Reserve’s meeting minutes.
  • Positive economic data may indicate that the Federal Reserve’s efforts to combat inflation are succeeding.
  • The market is trying to determine the future direction of interest rates.
  • Uncertainty remains in the crypto industry due to the bankruptcy of FTX and concerns about fraud at major exchanges.

Cryptocurrencies saw a surge in prices on the morning of January 4th, 2023, with Ethereum (ETH) trading at 3.3% higher, Dogecoin (DOGE) trading at about 2.8% higher, and Cardano (ADA) prices increasing by 6.5%. The rise is thought to result from investors anticipating extended rate hikes ahead of the release of the Federal Reserve’s latest meeting minutes and positive economic data.

The statement read:

“On a four-quarter change basis, total PCE price inflation was expected to be 5.5 percent in 2022, while core inflation was expected to be 4.7 percent, both lower than in the November projection.” Consequently, if the Fed can see that inflation is decreasing and following a positive trend, it can stop increasing interest rates, which would benefit the crypto market.

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A Favorable Environment for Cryptocurrencies

According to data from the U.S. Bureau of Labor Statistics and the Institute for Supply Management, the labor market is strong. There has also been a decline in demand for new orders in the manufacturing industry.

These factors are seen as potential indicators that the Federal Reserve’s efforts to combat inflation may be succeeding. Suppose the Fed can provide more evidence that inflation is easing. In that case, it may be able to end its campaign of raising interest rates. This could create a more favorable environment for riskier assets such as cryptocurrencies.

The crypto market is still trying to determine the near-term future of the crypto economy and the direction of crypto asset prices. There is an ongoing debate about how the crypto economy will perform in 2023 and how much the demand for cryptocurrencies will continue to rise.

Experts predict that the increased adoption of cryptocurrencies by institutional investors and businesses will drive the price of crypto assets higher. Others posit that regulatory uncertainty and market volatility will trend toward a decline in demand.

Additionally, there is uncertainty surrounding the cryptocurrency industry due to the recent bankruptcy of FTX and concerns about fraud at significant exchanges.

 

On the Flipside

 

  • The jobs report, coming out on Friday 6th, is expected to provide information on the labor market’s performance.
  • The market is in a “wait-and-see” mode, and investors are advised to pay close attention to these influencing events.

 

Why You Should Care

With Bitcoin’s increasing correlation to the stock market, the measures undertaken by governing bodies such as the Federal Reserve have far-reaching consequences for the cryptocurrency market. With the industry still in a shaky position after the collapse of FTX, keeping astride new measures is crucial for understanding the sector’s direction.

Read about how the Fed’s approach to inflation has affected crypto before:

FED Raises Interest Rates by 50bps to Highest Since 2007