US CPI data "falls short of expectations": Will Bitcoin and Ethereum "celebrate" or "fall from grace"?
Hello everyone, today Li Ying is here to discuss a topic that everyone is concerned about: the US "inflation data" — the CPI, which surprisingly did not turn out to be as "harsh" as everyone predicted! So, is this good or bad for our beloved Bitcoin (BTC) and Ethereum (ETH)?
What is CPI? Why is it so important?
Let's start with a brief explanation. CPI, or Consumer Price Index, is essentially the average level of price changes for goods and services that ordinary people buy in their daily lives. You can think of it as a "cost of living index."
Why is it so important? Because central banks (like the US "Federal Reserve") pay a lot of attention to it. If CPI is high, it means things are getting more expensive (inflation), increasing the burden on people's lives. The Federal Reserve might think, "We need to raise interest rates quickly to make money 'more expensive,' so people won't spend and borrow as much, which will help bring prices down."
Conversely, if CPI is not high, or even lower than expected, it indicates that inflationary pressures are not that significant. This could allow the Federal Reserve to "breathe a sigh of relief," thinking, "Hmm, we don't need to raise interest rates aggressively right now, and there might even be a possibility of lowering rates in the future."
CPI data falls short of expectations: Is it "bullish" or "bearish" for Bitcoin and Ethereum?
Now that we understand CPI, let's take a look at this "shortfall" situation.
In the short term, this is usually considered "bullish"! Why?
Lower interest rate expectations, increased liquidity:
In simple terms: If the Federal Reserve thinks inflation is not that serious, it won't be in a hurry to "withdraw" money from the market (raise interest rates). This means there will be more "water" (i.e., money) in the market.
Li Ying draws an analogy (stock market): Just like when people buy stocks, if money is easy to borrow and there is plenty of it in the market, people are more willing to take risks and invest in stocks, which is likely to drive the stock market up.
Cryptocurrency: Assets like Bitcoin and Ethereum, which are considered risky, are very sensitive to the amount of "money in the market." When there is more money, people are more motivated to buy these "high-risk, high-reward" assets. So, with more money, people are more likely to buy more Bitcoin and Ethereum, potentially driving up their prices!
Increased risk appetite:
In simple terms: When the market is less worried about high inflation and ongoing interest rate hikes, people become more "willing to take risks."
Drawing an analogy (real-life example): Imagine if you know that housing prices won't rise too dramatically in the next few years, you might be more willing to take out a loan to buy a house. But if you know that housing prices might skyrocket in the coming years, you might hesitate to take out a loan to buy a house.
Cryptocurrency: Bitcoin and Ethereum are often seen as riskier assets than stocks. When overall market risk appetite increases, these "riskier" options are more likely to attract funds.
So, simply put, a CPI that falls short of expectations means that the market's expectations for the Federal Reserve to "stop raising rates" or even "lower rates in the future" will strengthen, potentially increasing the influx of funds into the market, some of which will flow into Bitcoin and Ethereum, pushing their prices up.
However, things aren't always that simple!
While it may be bullish in the short term, we must also recognize that the cryptocurrency market is very complex and influenced by many factors.
The degree of "bullishness": Whether the data "falls short of expectations" is by "a little" or "a lot" makes a difference in its impact on the market. If it only slightly falls short, it may only cause minor fluctuations.
Other macro factors: Besides CPI, employment data, geopolitical issues (wars, conflicts), and internal industry news (like problems with a major exchange or the launch of an important project) can all instantly change market direction.
Market sentiment: Sometimes, the market has already "priced in" the expectations of rate cuts, and even if the data is favorable, it may experience a lack of upward momentum due to "profit-taking."
The "sell the news" effect: Sometimes, before the data is released, people have already "bet" on the good news, and when the data actually comes out, some may "sell" to take profits, leading to a short-term decline.
Drawing an analogy: What else could CPI data "falling short of expectations" indicate?
In addition to the direct impact on monetary policy, a CPI that falls short of expectations can also provide deeper signals:
The global economy may face the risk of "weak demand":
In simple terms: If prices aren't rising much, it could be because people are buying less, and demand isn't that strong.
Consideration: If people's consumption willingness is generally low, it could mean that not only prices but also corporate profits may decrease, leading to slower economic growth. This is not a particularly good signal for all assets (including stocks, cryptocurrencies, and even bonds) in the long run, as it suggests that future "growth" may not meet expectations.
Countermeasure: At this point, investors may become more cautious. Even if they buy Bitcoin in the short term due to eased interest rate expectations, they will be wary of potential economic downturn risks and may focus more on "safe-haven" assets or choose to "wait and see."
The risk of "stagflation" is somewhat alleviated, but concerns about "recession" may intensify:
In simple terms: "Stagflation" refers to "economic stagnation" + "inflation." If inflation cools down, it indicates that the "inflation" problem has eased.
Consideration: However, if the decrease in inflation is due to insufficient demand, it means that the risk of "economic stagnation" may be rising. Everyone knows that economic recession is scarier than inflation because recession means rising unemployment, business failures, and overall economic activity stagnation.
Countermeasure: If the Federal Reserve previously raised rates "reluctantly" to curb high inflation, and now inflation has decreased, it may start to focus on "whether this will lead to a real economic recession." In this case, even if people buy cryptocurrencies in the short term due to eased liquidity, if concerns about economic recession intensify, the appeal of high-risk assets (like Bitcoin and Ethereum) may diminish.
In simple terms, when CPI data falls short of expectations, it’s like telling you: "Oh, inflation in the future doesn't seem that scary, and banks might not be so aggressive in 'collecting money'." This makes people feel optimistic about the short-term market. But at the same time, it also serves as a reminder: "Is it because people aren't buying much that the economy itself is a bit 'wilted'?" This 'wilted' state could bring long-term risks.
Conclusion:
Short term (a few hours to a few days after the data is released): It is likely bullish because the expectations for rate hikes decrease, and the market is expected to see more funds, potentially driving up the prices of Bitcoin and Ethereum.
Medium term (a few weeks to a few months): It is necessary to observe whether concerns about "economic growth slowing" and "recession" will overshadow the optimistic sentiment from "eased rate hikes." If recession concerns intensify, even if there is short-term bullishness, it may face pressure.
Long term: The fundamentals of the macro economy, including global economic growth, technological development, and regulatory policies, remain key factors determining the long-term trends of Bitcoin and Ethereum.
So, when you see CPI data falling short of expectations:
In the short term, you can observe the upward momentum in the cryptocurrency market ("a little, short-term celebration").
But more importantly, think about the potential warnings of economic slowdown or even recession that it may imply ("potential long-term risks").
It's like a doctor telling you that one of your indicators has dropped, which is a good thing, but at the same time, you should be aware that it might be due to an overall decline in your body's functions.
Investing involves risks, and you should proceed with caution! Always do your own research!
The above content is exclusively original by Li Ying, please indicate the source when reprinting! Article publication review has a delay, and market conditions change rapidly; the above suggestions are for reference only, and risks are borne by the reader. I hope Li Ying's insights will be helpful to you!
The content of the article is time-sensitive and for reference only; risks are borne by the reader.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
