- The crypto market appears resilient despite ongoing concerns about the US debt ceiling.
The cryptocurrency market showed gains Wednesday following the release of a lower-than-expected CPI report and news of reduced trade tensions between the US and China. As geopolitical conflict fears ease, speculative demand for risky assets like cryptocurrency typically spikes, though mainstream concerns about the US government debt trajectory remain.
Though early, some signs indicate the crypto market may be decoupling from traditional markets. Bitcoin (BTC) traded near $109,000 and Ether (ETH) gained 3% on Thursday, while S&P 500 futures reversed earlier gains attributed partly to buzz surrounding US-China trade normalization.
Bitcoin, Ether benefit from potential liquidity injection
Recent events clarified or eased uncertainty: A 2.4% annual inflation rate (CPI) eased fears about potential economic damage. News that both the US and China plan to restore February 2025 tariff levels reduced expectations of escalating economic fallout.
Despite the reassurance, inflation and growth fears persist. Counterintuitively, the US Dollar Index fell, suggesting a retreat from the dollar amid concern about Fed policy and fiscal deficits, a reversal from typical market responses to inflation news.
JPMorgan’s CEO Jamie Dimon highlighted recession risks, citing potential job losses and inflation ahead of the Fed meeting. However, the impacts of trade tariffs on broader growth seem minimal so far, according to RSM economist Joe Brusuelas.
Market expectations for the Fed’s path interest rates increased markedly recently. As of now, futures suggest a 73% probability the terminal rate remains above 3.75% by the year-end.
Higher interest rates can slow economic activity and raise the cost of capital, pressuring riskier investments like crypto. However, the crypto market’s rise now diverges from asset sentiment around stocks and the dollar.
Anecdotal evidence points to an anticipation of an impending debt ceiling increase debated between Washington policymakers. Given crypto’s decentralized nature, participants, analysts, and users see the fundraising event as an opportunity for potential liquidity injection.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
