Cryptocurrency Values Plummet Following Surprising Inflation Data Release
Major cryptocurrencies, including Bitcoin, Ethereum, and Ripple, experienced a significant dip on Thursday, August 11, 2022. The selloff was primarily due to market uncertainty and investor apprehension ahead of key Federal Reserve monetary policy signals.
Investors were uncertain whether the Fed would signal a pivot to easing or continue its "ultra-hawkish" stance, which had previously triggered crypto market downturns. The concerns centered around the direction of U.S. interest rates and how Fed Chair Jerome Powell’s forthcoming comments at the Jackson Hole symposium might impact risk assets like cryptocurrencies.
The dip was also a continuation of the bear market conditions triggered by the Fed’s aggressive monetary tightening that began earlier in 2022. This policy shift ended previous crypto cycles and led to significant pullbacks in digital asset prices, amplifying volatility and triggering sharp declines like the one seen on August 11.
Ripple’s price, while not specifically tied to an event on that exact date, likely experienced pressure from similar market dynamics.
The broader macroeconomic factors contributing to the sustained bearish sentiment throughout 2022 include the Federal Reserve's monetary policy tightening. Core inflation, which excludes food and energy prices, rose 3.1% on the year, and the Consumer Price Index for July rose 2.7% on an annual basis. These figures indicate ongoing inflationary pressures, which further added to investor concerns.
In other news, President Trump falsely claimed that inflation is no longer a problem, despite the rising inflation figures. This claim came after Trump fired the head of the Bureau of Labor Statistics, Erika McEntarfer, on August 1st, accusing her of using "rigged" numbers. Half of Americans say that the price of groceries is a "major stress" in their life, according to recent polling from the Associated Press-NORC Center for Public Affairs Research.
In the stock market, the S&P 500 dipped significantly after the PPI numbers were released on Thursday and closed just two points higher. The Dow dipped on the inflation news but recovered by market close on Thursday. Jobless claims for Aug. 9 came in at 224,000, and the S&P 500 closed at a record high on Wednesday.
In the world of cryptocurrencies, the price of Bitcoin is down 3.8% on the day ($117,900), Ethereum is down 4% ($4,535), and Ripple is down 6.1% ($3.07). The price of BNB is down 0.7%, while Cardano, the 8th largest cryptocurrency in the world, is up 2.3%. The price of TRON is down 0.6%, and the price of Solana is down 4%. This is the largest monthly increase since March 2022, according to the Wall Street Journal.
In conclusion, the sharp dip on August 11, 2022, was due to a mix of investor anxiety over Federal Reserve interest rate policies and Powell’s upcoming remarks at Jackson Hole, a continuation of the bear market conditions triggered by the Fed’s aggressive monetary tightening starting in early 2022, and general market uncertainty causing selloffs in risk assets including cryptocurrencies.
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