The government released the inflation figures for September on Thursday. The rate of inflation increased by 8.3% in comparison to September 2021, which was higher than anticipated. That is the 16th month in a row that inflation has been in the middle to high single digits. If the cost of goods continues to rise at this rate, the Federal Reserve will likely raise interest rates by 0.75 percent next month to cool the economy.
A tale of two asset classes Interestingly, the gloomy inflation news appears to have sparked a decoupling between the crypto industry and the tech stock market, which has been closely mirrored throughout 2022. The total market capitalization of all cryptocurrency exchanges, as measured by CoinMarketCap, has increased by as much as 6.99% since the inflation figures were published yesterday. Over the same time frame, Bitcoin, the largest and most valuable crypto asset, also increased by more than 7%.
However, at the time of writing, the S&P 500, which tracks the stock prices of the top 500 most valuable companies, is down 1.83 percent. The emerging divergence that exists between cryptocurrencies and stocks could indicate that the digital asset market is in for better times.
As expansion remains high – – which is by all accounts the new typical regardless of the endeavors of the Fed – – expansion will dissolve and stifle the worth of the dollar. Because they are inversely correlated, cryptocurrency assets benefit from a falling dollar.
The cryptocurrency and stock markets have implicitly accepted the possibility that the Federal Reserve will raise short-term interest rates by 75 basis points in November. By the end of the year, we’ll have to see if the hikes are finally able to stop inflation. We’ll also have to watch how the equity and cryptocurrency markets react to the more expensive access to dollars provided by the Fed’s hawkish policies.