Crypto Market on Edge as US Inflation Surges, War Risk Remains

Key Insights

• The crypto market is on edge this week, with Bitcoin stalling at $80k.
• US consumer and producer inflation continued rising this month.
• There is a risk that the US-Iran war will resume.

Bitcoin traded near $80,000 this week while broader crypto momentum weakened. Ethereum and several large-cap altcoins also pulled back as investors reacted to hotter U.S. inflation data and renewed geopolitical uncertainty surrounding Iran.

Crypto Market at Risk as US Inflation Surges

Bitcoin traded near $80,000 while broader crypto momentum weakened, and the market capitalization of all tokens has pulled back to $2.68 trillion. Ethereum has dropped by 5.5% in the last seven days, while Hyperliquid, Zcash, and Bitcoin Cash have slumped by over 3.65% in this period.

There is a risk that the crypto market will come under pressure in the coming months as US consumer inflation hikes. A report released today, May 13, showed that the headline Producer Price Index (PPI) surged to 6.0% in May from the previous 4.3%. Core inflation, which excludes the volatile items, rose to 5.2%.

Another report released on Tuesday revealed that the headline Consumer Price Index (CPI) rose from 3.3% in March to 3.8% in April this year. These numbers have moved further from the Federal Reserve’s target of 2.0%.

Therefore, there is a risk that the Federal Reserve will find it hard to cut interest rates. A Polymarket poll finds that most participants expect the Fed will not cut interest rates this year. Odds of a rate cut have dropped to 25%.

Bitcoin and most altcoins tend to do well when the Fed is cutting interest rates and vice versa. For example, Bitcoin and most altcoins plunged in 2022 as the bank hiked interest rates.

US-Iran War Risks Remain

Meanwhile, the crypto market is at risk of a strong bearish breakdown as risks of the resumption of the war with Iran.

In a statement earlier this week, President Donald Trump said that he rejected Iran’s offer to end the war. He also maintained that the ceasefire was on life support, raising the possibility that he would restart the war.

A possible scenario is where Trump launches a limited attack to force the Iranians back to the negotiating table.

However, there is a possibility that he may decide to avoid the war, especially after the latest media reports. For example, according to the New York Times, Iran has recovered most of its lost arsenal, including having 70% of its launchers.

At the same time, a resumption of fighting will make the inflation situation much worse as Iran may decide to bomb all oil infrastructure in the Middle East. Bitcoin and altcoins will likely drop sharply after the resumption of the war.

Spot Crypto ETF Inflows Have Faded

Meanwhile, the crypto market is also at risk as institutional demand remains weak. Data shows that spot Ethereum ETFs have shed over $140 million in assets in the last two consecutive days.

Similarly, spot Bitcoin ETFs lost over $233 million in assets on Tuesday, with Fidelity’s FBTC losing $86 million in assets and IBIT shedding over $32.9 million. Bitwise’s BITB lost over $17.5 million on the same day.

Other top altcoin ETFs like Dogecoin, Avalanche, Polkadot, and Hyperliquid have not had substantial demand this week.

Bitcoin Price Rising Wedge Signals a Top

Technicals also suggest that Bitcoin may have topped. The daily chart above shows that Bitcoin found substantial resistance at the 200-day Exponential Moving Average (EMA), a sign that bulls struggled to push it higher.

The coin has also formed a rising wedge pattern, which may lead to a strong bearish breakout.

The post Crypto Market on Edge as US Inflation Surges, War Risk Remains appeared first on The Market Periodical.