S&P 500 Gained 2.1% Yesterday, Bitcoin Increased By Over 3%, Nasdaq Added 2.9% - Yesterday's US CPI Print Helped Various Assets

S&P 500 Gained 2.1% Yesterday, Bitcoin Increased By Over 3%, Nasdaq Added 2.9% - Yesterday's US CPI Print Helped Various Assets

Yesterday, the US inflation report was released, which came in at 8.5% in July. The market did not expect such a large drop, estimating a level of 8.7% before the data was released. The stock markets reacted positively, and the major equity indexes rose significantly. The S&P 500 gained more than 2.1% during yesterday's session and the Nasdaq almost 2.9%.

Bitcoin And Ethereum

Cryptocurrencies, however, reacted most noticeably - on the Conotoxia MT5 platform, Bitcoin gained around 3.3% yesterday. And today, it continues its rise, breaking through the local peak of $2,485 on 30 August 2022. At 11.30 am GMT+3, the price of BTC is $24,471. The ETH price has risen even more strongly after a surprisingly low inflation reading. Ethereum gained more than 8.5% yesterday, and at 11.30 GMT+3, it is already up more than 2.3%. The token already costs $1,887 - its highest recorded level since 6 June this year.

S&P 500 Gained 2.1% Yesterday, Bitcoin Increased By Over 3%, Nasdaq Added 2.9% - Yesterday's US CPI Print Helped Various Assets

Reaction

The market's reaction has a lot to do with expectations of interest rate hikes, which fell after the US inflation reading. However, it is still a long way from calling it a permanent decline. Inflation is still at its highest level in decades and the economy is operating in an environment of negative real interest rates.

According to CME Group data, the Federal Reserve (Fed) is likely to push rates even higher. Currently, the Fed Funds Rate is at just 2.5 pp, the level before the Covid pandemic. The CME Group estimates that we will still reach the 3.25 pp level this year, and peak in 2023 at 3.5 pp. However, as for the 2023 projections. The Federal Open Market Committee (FOMC), which decides them, is already much less unanimous and a lot may still depend on the information coming out of the economy.

US Economy - Most metrics - such as the yield curve, consumer sentiment, and economic growth - point to a recession

Information on its state in the US is not pleasing. Most metrics - such as the yield curve, consumer sentiment, and economic growth - point to a recession. The labour market, which is surprisingly strong at the moment, is reacting last and is likely to become further evidence of a crisis soon.

The cryptocurrency market has never been in such a severe recession, so it is hard to determine exactly how it will behave. For now, the data shows a relatively high level of correlation between it and the stock market. This is not good news, as the latter almost always loses in a crash.

Polygon (MATIC)

Polygon (MATIC) is an Ethereum token that powers the Polygon network, which is a protocol for building Ethereum-compatible blockchains and decentralised applications (DApps). Polygon is also referred to as a 2nd level (2nd level) solution to help Ethereum to scale faster, by increasing the efficiency of the network.

On Wednesday, Polygon shared data on user growth. Their total number in July was 11,800, gaining 47.5% since March and up 400% year-to-date. Interestingly, according to the project, "74% of teams integrated exclusively on Polygon, while 26% deployed on both Polygon and Ethereum,". This shows a very high level of confidence in the new technology, which can be the new foundation for the development of DApps. Since the local low on 19 July this year. MATIC has risen almost 172%.

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Daniel Kostecki

Daniel Kostecki

Daniel Kostecki is an award-winning senior market analyst and a Director of the Polish branch of Conotoxia Ltd.

He is a victor of the FxCuffs statuette for "Blog of the Year" and "Personality of the Year".
He has 15 years of experience on the financial markets and a diploma in Economics from the University of Szczecin in Poland. Daniel is privately connected to the financial markets since 2007 and professionally - since 2010. Author of numerous commentaries and analyses of the situation on the financial markets and a guest on Polish TV, press and radio.