The cryptocurrency market shows signs of an incoming correction hours before the U.S. Consumer Price Index report is released.
The global crypto market capitalization declined 3.3% in the past 24 hours, sitting at $2.22 trillion, per data from CoinGecko. The market-wide trading volume has been moving between $80 billion and $87 billion as bears continue to dominate.
Bitcoin (BTC) plunged below $61,000 and is trading at $60,800 at the time of writing. The leading cryptocurrency briefly touched an intraday low of $60,300 earlier today.
According to data provided by Santiment, whale transactions consisting of at least $100,000 worth of BTC declined from 10,098 to 8,176 over the past day. Declining whale activity usually hints at market uncertainty or selloff from retail traders.
Notably, the BTC funding rate recorded a strong surge from 0.004% to 0.007% over the past 24 hours. The indicator shows that the amount of bets on Bitcoin’s price movement is mostly bullish. However, a fall below the $60,000 mark could bring increased liquidations, and consequently, a further correction.
Bitcoin’s Relative Strength Index is currently at 45, per Santiment data. The RSI shows that BTC is currently at a neutral zone ahead of the U.S. CPI report, scheduled for today.
The U.S. CPI for August came at 2.5%, a level not seen since March 2021, and is expected to drop to 2.3%. This could increase the chances of another rate cut at the Federal Open Markets Committee meeting on Nov. 6 and 7.
One of the bullish catalysts for last week was the U.S. jobs report, sending the BTC price above $64,000. If the U.S. inflation cools down again, bullish momentum would be expected in financial markets, including crypto.
Tether will release a documentary about USDT and its impact on the fight against inflation in honor of its tenth anniversary.
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The documentary “Stability and Freedom in Chaos” tells the story of how USDT has become “a lifeline” for those who fight inflation and promote “financial freedom worldwide”.
🎬Today marks 10 years of USD₮ ! To celebrate, we’re launching our documentary ‘Stability and Freedom in Chaos’ soon. Dive into the journey of how $USDT has become a lifeline for millions, fighting inflation and fueling financial freedom worldwide. 🌎🤝 pic.twitter.com/oviKmIgpgx
Commenting on the documentary’s release, Tether CEO Paolo Ardoino claimed that the company’s mission is to provide access to finance to billions of people in developing countries who cannot have bank accounts.
“Tether has built its company on a simple mission: bring financial inclusion to the billions of people, primarily living in developing countries, that can’t have bank accounts (because they’re not generating enough revenues for the traditional banking industry) or live in high inflation countries.”
According to him, Tether has become “a symbol of disintermediation, sustainability, and stability” that helps empower “individuals, communities, cities, and entire countries”.
10 years towards financial freedom
In 2014, Brock Pierce, Reeve Collins, and Craig Sellars founded the Realcoin project, later known as Tether. The main idea was to create a digital currency pegged to fiat money to provide stable value and simplify cryptocurrency trading.
In October 2014, USDT was introduced as a stablecoin pegged to the U.S. dollar. Since that time, Tether was actively working to expand its ecosystem. Later, USDT was launched on the Ethereum, TRON, and TON blockchains, allowing the tokens to be used on various decentralized platforms.
In addition, USDT has been widely integrated into various dapps and smart contracts, strengthening its role in decentralized finance.
USDT has become a must-have coin for key areas in crypto and blockchain
Tether quickly became a popular currency for traders, as it allowed them to access stable funds during times of high volatility in the crypto market. It was integrated into many cryptocurrency exchanges, which increased its liquidity.
Tether and its stability have greatly influenced the development of the crypto market, allowing traders and investors to quickly move funds between cryptocurrencies and fiat without great losses due to price fluctuations.
Throughout its history, Tether has remained the main stablecoin actively used throughout the crypto space. In the ten years since its launch, USDT has grown to a market capitalization of almost $120 billion, making it one of the largest cryptocurrencies ever.
Commenting on the documentary release, Ardoino said that USDT has become “a symbol of disintermediation, resilience, and stability.” The film explores the adoption of USDT in three countries: Argentina, Turkey, and Brazil.
Why these countries? There are several reasons for this, but all of them share one key factor: economic instability.
These countries experience high inflation and instability of their national currencies. Additionally, developing countries often need more access to traditional banking services. Cryptocurrencies like Tether allow people to conduct financial transactions without banks, which is especially important in countries with low banking literacy.
For example, Argentina faces economic problems such as high inflation, devaluation of the national currency, peso, and restrictions on foreign exchange transactions. People are looking for ways to protect their savings, and cryptocurrencies can be an alternative. The country’s new president, Javier Milei, has also supported the use of BTC along with other units of payment as part of a strategy to develop free competition in the local currency market.
A similar situation is happening in Turkey, where people face economic instability, including high inflation and depreciation of lira. Cryptocurrencies are also seen as a way to protect savings from inflation.
In addition to economic problems, a significant number of people in Brazil do not have access to banking services. USDT allows these people to participate in the financial system and make transactions without opening a bank account.
Thus, in its ten years, USDT has become an essential asset in trading and a popular alternative to the dollar, giving people in developing countries access to the crypto market, allowing them to invest, trade, and make payments.
Despite its success, there are still many unclear moments in the history of Tether
However, there are still dark moments in Tether’s history. In the past, Tether has faced criticism for possible market manipulation and for possibly supporting the prices of Bitcoin (BTC) and other cryptocurrencies.
In addition, although Tether claims that each USDT is backed by one U.S. dollar, many critics point to the lack of regular and independent audits that could confirm this claim. This raises questions about how secure and liquid the reserve is and whether these assets can provide full coverage for USDT.
Former Coinbase CTO Balaji Srinivasan spoke at the Network State Conference in Singapore on Sept. 22 about Bitcoin’s potential to protect wealth against inflation.
Srinivasan claimed that Bitcoin (BTC) serves as a shield against what he describes as the gradual erosion of wealth by the state through inflation.
“The Fed wants you dead—just a little bit every year. And so we resist that. We stand against that,” Srinivasan said about Bitcoin and crypto.
Srinivasan compared the U.S. Federal Reserve’s approach to inflation with a slow process of wealth loss over time. In the current financial system, inflation is often seen as normal. The Fed targets around 2% inflation per year, meaning that the money people hold gradually loses its value.
In March 2023, Srinivasan entered a social media argument where he placed a $2 million bet that Bitcoin would reach $1 million by June 17, 2023.
The wager, initiated by Twitter user James Medlock, proposed that Srinivasan would win $1 million in USDC and keep 1 BTC if his prediction was correct, while Medlock would win $1 million in USDC if it wasn’t.
Srinivasan is an entrepreneur, investor, and former Chief Technology Officer of Coinbase, a leading cryptocurrency exchange. Before joining Coinbase, he co-founded several successful tech companies, including Counsy and Earn.com. Srinivasan is also known for his involvement as a general partner at Andreessen Horowitz.
Bitcoin financial parallels
In his statements, Srinivasan also drew parallels between the financial and medical systems. Srinivasan suggested that, just as inflation is seen as an inevitable part of the economy, the healthcare system treats aging as something that should be managed in small steps.
He criticized this mindset, arguing that just as people accept losing a little bit of money each year, they’re also expected to accept losing a bit of their health each year.
Bitcoin, according to Srinivasan, offers an alternative to this approach.
“Bitcoin is about stopping the state from slowly draining your wealth.”
Srinivasan.
Unlike traditional currencies, Bitcoin has a fixed supply, meaning it isn’t controlled by governments or banks. This setup makes it more resistant to inflation, offering a potential way for people to preserve their wealth over time.
Bitcoin whales seem bullish with increased accumulation as the release of the U.S. Consumer Price Index data gets closer.
According to data provided by IntoTheBlock, the number of whale transactions consisting of at least $100,000 worth of Bitcoin (BTC) surged from 12,560 to 16,240 between Sept. 7 and 9.
The increased whale activity around BTC came after its price plunged below the $54,000 mark amid an increased selloff.
Per ITB data, Bitcoin whales have moved over $70 billion worth of the asset in the past seven days.
It’s important to note that increased whale activity could usually lead to high price fluctuations, but in this case, large holders seem to be accumulating Bitcoin due to increased inflows.
The large holders’ inflow plunged from 11,570 to 1,100 BTC on Sept. 7 and declined even further to 469 BTC a day later, suggesting a massive selloff, according to data from ITB. However, the Bitcoin whale inflow recorded a notable increase to 1,580 BTC on Sept. 9.
The indicator shows that the whale selloff might have come to an end.
Not only whales, but also retail holders seem to be accumulating Bitcoin. According to ITB, Bitcoin saw an exchange net outflow of over 6,000 BTC yesterday.
BTC exchange net flows – Sept. 10 | Source: IntoTheBlock
Bitcoin is now up 3.5% and is trading at $56,950. The flagship cryptocurrency briefly touched a local high of $58,000 earlier today and has been consolidating close to the $57,000 zone.
At this point, investors are looking bullish as the U.S. CPI data, which shows the inflation rate in the country, is expected to come at 2.6%.
If the inflation rate for August comes at or lower than the expected percentage, economists believe a 50 basis point interest rate cut would be most likely this week.
The rate cut could, consequently, form a bullish momentum for financial markets such as crypto and stocks.
Is Bitcoin on the verge of a major breakout, or will September’s economic indicators confirm the bearish sentiment that has kept the market in limbo for weeks?
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Bitcoin waiting for its next signal
For the past few weeks, the crypto market has been treading water, with prices stubbornly stuck in a tight range.
Bitcoin (BTC) has been hovering around the $60,000 mark, often dipping just below it and struggling to maintain any momentum above this level. As of Sep. 3, BTC is trading at approximately $57,500, a level it has repeatedly revisited over the past month.
BTC 6-month price chart | Source: TradingView
Similarly, Ethereum (ETH) has found a strong resistance at $2,500, barely budging from this range despite attempts to break through, trading at $2,450 levels as of this writing.
ETH 6-month price chart | Source: TradingView
This sideways price action has left many investors and traders on edge, especially as we head into September — a month packed with critical events that could strongly influence the market’s direction.
Among these are the U.S. Presidential Debate, the Consumer Price Index (CPI) data release, the Producer Price Index (PPI) data release, and the Federal Open Market Committee meeting.
The CPI and PPI data are particularly important because they will likely play a key role in the Federal Reserve’s upcoming interest rate decision. If inflationary pressures appear to be easing, the Fed might opt for a rate cut.
With so much on the horizon, let’s dive deeper to understand what to expect, the likely repercussions, and where things could go from here.
The inflation indicators steering the Fed’s next move
The U.S. CPI and PPI are two of the most critical economic indicators that could influence the Fed’s interest rate decision this month. Understanding these numbers is key to grasping how the market might react in the coming weeks.
The CPI data for August, set to be released on Sep. 11, is a crucial measure of inflation, tracking how prices for everyday goods and services change over time.
In July, CPI inflation was at 2.9%, slightly down from 3% in June, suggesting a gradual cooling of inflation. However, the Fed’s goal is to bring inflation down to 2%, so the August CPI figure will be closely watched.
If this number drops below 2.9%, it would signal that inflation is moving in the right direction, potentially easing the pressure on the Fed to maintain high-interest rates.
The following day, on Sep. 12, the PPI data will be released. The PPI measures the average change in selling prices received by domestic producers for their output, offering insight into the inflationary pressures within the supply chain.
In July, the PPI showed a more stark reduction than anticipated, with the year-on-year rate falling to 2.2%, well below the previous period’s 2.7%.
Core PPI, which excludes volatile food and energy prices, also saw a sharp decline, coming in at 2.4% year-on-year compared to the expected 2.7%.
The importance of these inflation measures cannot be understated, as they will heavily influence the Fed’s decision on interest rates during the upcoming FOMC meeting on Sep.18.
In the previous meeting, the Fed opted to keep rates steady, with the current target range set between 5.25% and 5.50%. However, Fed Chair Jerome Powell has hinted that the central bank is nearing the end of its rate-hiking cycle, provided inflation continues to ease.
According to the CME FedWatch Tool, the market is currently split, with 67% expecting a 25 basis point cut to a new target rate of 5.00-5.25%, and 33% anticipating a more substantial 50 basis point cut, bringing the rate down to 4.75-5.00%.
A 25 basis point cut would likely signal that the Fed is entering a typical easing cycle, which could provide stability to the market.
On the other hand, a more aggressive 50 basis point cut might trigger an immediate surge in Bitcoin prices as investors react to the potential for lower borrowing costs and a more accommodative monetary policy.
The second presidential debate: a turning point?
As the second U.S. Presidential Debate approaches on Sep. 10, the crypto market is bracing for potential shifts in sentiment and direction.
This debate will be particularly significant for the crypto community, as it brings together two candidates with starkly different histories and perspectives on the industry.
On one side, we have Republican nominee Donald Trump, who has taken a surprisingly pro-crypto stance during this campaign.
Just a few years ago, Trump referred to Bitcoin as a “scam” and voiced concerns about its threat to the U.S. dollar. However, in a dramatic reversal, he has now become a vocal advocate for the crypto industry.
In a keynote speech at the Bitcoin conference in Nashville, Trump promised to fire SEC Chair Gary Gensler—a figure widely criticized within the crypto community. He also unveiled his plan to create a national Bitcoin strategic reserve and pledged support for U.S. crypto miners.
These bold promises have positioned Trump as a candidate who could potentially bring about big changes in how the U.S. government interacts with the crypto industry.
On the other side, Vice President Kamala Harris has remained relatively quiet on the subject of crypto throughout her campaign, leading to much speculation about her stance.
However, recent comments from her senior campaign adviser, Brian Nelson, have shed some light on her views. Nelson indicated that Harris intends to support policies that allow emerging technologies, including crypto, to continue to grow. While the statement was vague, it marks the first official acknowledgment of the crypto industry from the Harris camp.
The timing of these statements is critical, especially as the Democratic Party’s latest document didn’t mention crypto at all—a fact that hasn’t gone unnoticed by the industry.
This omission, combined with Harris’ recent comments, has led to mixed interpretations. Some see it as a positive sign, suggesting a hands-off approach, while others view it as a continuation of the Biden administration’s policies, which have been seen as less favorable to the crypto industry.
Additionally, recent backlash over misinformation regarding Harris’ alleged support for taxing unrealized capital gains has further clouded perceptions. Although this rumor was unfounded, it raised concerns within the crypto community, further obscuring her position.
Meanwhile, the debate is set against a backdrop of increased regulatory scrutiny, with the SEC recently issuing a Wells Notice to NFT marketplace OpenSea, signaling potential legal action.
In this context, Trump’s recent moves, such as announcing a new set of digital trading cards — ironically listed on OpenSea — have further solidified his pro-crypto image.
The timing of this notice has fueled speculation that a Harris administration might maintain or even intensify regulatory pressure on the crypto industry.
For crypto investors, a strong performance from Trump is likely to be seen as a bullish signal, given his clear pro-crypto stance and promises of deregulation.
Conversely, a Harris victory in the debate might be more challenging to interpret. While her recent comments suggest a willingness to support the industry, the lack of specific policy details and the ongoing regulatory actions raise questions about what a Harris administration would mean for crypto.
Where could the crypto market head next?
As the crypto market stands at a critical juncture, many experts are weighing in on where things could go from here.
One such indicator comes from Santiment, a well-known crypto market analytics platform, which recently highlighted that Bitcoin is showing signs of life.
Santiment observed that as fear, uncertainty, and doubt (FUD) grow among traders, particularly with a noticeable increase in bearish sentiment, there’s a chance that this pessimism could actually set the stage for a rebound. In other words, when everyone starts feeling bearish, it might be the perfect time for the market to bounce back.
📊 Bitcoin has shown signs of life as the S&P 500 is paused for Labor Day. Signs of crypto growth without reliance on equities is a promising hint of the sector’s strength. Combined with growing trader bearishness and FUD, there are promising signs an upcoming rebound is near. pic.twitter.com/d3ykTTSHY0
Adding to this cautious optimism, crypto analyst Ali Charts pointed out that top Bitcoin traders on Binance are leaning slightly bullish, with over 51% holding long positions on BTC.
This tilt towards optimism, even if slight, suggests that traders are not entirely convinced that the recent market lull will lead to a prolonged downturn. It reflects a belief that the worst may be over and that Bitcoin could be poised for a recovery.
However, the broader economic backdrop remains a concern. The Kobeissi Letter recently highlighted a worrying trend in U.S. employment data.
Government hiring is inflating jobs numbers.
Private sector jobs growth as % of total payroll growth fell to 38% in July, the lowest since the 2020 pandemic.
Historically, every time the private payroll growth share fell below 40%, the US economy was in a recession.
Government hiring is inflating job numbers, while private sector job growth as a percentage of total payroll growth has dropped to its lowest level since the 2020 pandemic.
Historically, when private payroll growth falls below 40%, the U.S. economy has often been on the brink of a recession. This suggests that while the government is adding jobs at a record pace, the private sector is struggling, which could have negative implications for the economy — and, by extension, the crypto market.
Therefore, the upcoming CPI and PPI data will be crucial in shaping the Fed’s decision on interest rates during the FOMC meeting. If inflation continues to ease, the Fed may cut rates, boosting the crypto market.
Whether we see a bullish breakout or increased volatility will depend on how these political, economic, and market factors play out in the coming weeks. The decisions made and the data revealed this month will be critical in setting the course for where crypto is headed next.
Will Bitcoin’s price hold above critical support levels as the market digests cooling inflation and yen trade risks?
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A brief look at inflation figures
Inflation is like the temperature in a room — too hot, and it’s uncomfortable; too cold, and it’s just as bad. For the past few months, the U.S. economy has been trying to find that ‘just right’ spot and all eyes are on the latest numbers to see where we’re headed next.
The Producer Price Index data for July 2024 just came in, showing inflation is cooling off. PPI inflation fell to 2.2%, slightly below expectations, marking the lowest level since March 2024.
BREAKING: July PPI inflation falls to 2.2%, below expectations of 2.3%.
Core PPI inflation falls to 2.4%, below expectations of 2.7%.
In another constructive sign, PPI inflation is now at its lowest level since March 2024.
Core PPI inflation also dropped to 2.4%, surprising many who expected it to be higher. With numbers like these, a rate cut in September seems almost certain.
But the story doesn’t end there. The bigger headline everyone’s waiting for is the Consumer Price Index (CPI) data, set to be released on August 14.
This data is crucial because it gives a clearer picture of how much everyday prices are rising or falling, affecting everyone from the average consumer to big investors.
Wall Street is predicting a 2.9% rise, but there’s still a 37% chance it could be higher than expected. If it goes above 3.0%, it could signal that inflation is back on the rise, which would be the third time in five months. That could change everything, from interest rates to market expectations.
Tomorrow’s CPI inflation data is crucial:
Wall Street is currently showing 2.9% as the consensus expectation.
However, there is a 37% chance of inflation coming in ABOVE 2.9%, according to @Kalshi.
But inflation isn’t the only concern. Just a few days ago, on August 5, the financial markets were rattled by the unwinding of the yen carry trade.
For those unfamiliar, the yen carry trade involves borrowing in Japan’s low-interest-rate environment and investing in higher-yielding assets elsewhere.
This strategy worked smoothly until Japan’s interest rates started rising, as they did recently for the second time since 2007 — the first being in March 2024. The result was a market shake-up, and the risk from this trade hasn’t fully dissipated.
As we await the CPI data and grapple with the ongoing risks from the yen carry trade, the question remains: could these global financial uncertainties pull the rug out from under crypto? Let’s find out.
Yen carry trade uncertainty continues to cloud the market
While recent inflation data suggests cooling in the U.S., the risks associated with the yen carry trade remain a looming threat that could heavily impact global markets, including the crypto space.
The unraveling of this massive trade, estimated by Reuters to involve up to $4 trillion, has already sent shockwaves through global financial markets, triggering a sharp sell-off in risk assets like Bitcoin (BTC), which plummeted to as low as $49,000 on August 5.
Since then, BTC has regained its footing and is trading at around $61,000 as of August 13, marking a rise of about 24%.
BTC 6-months price chart | Source: TradingView
Richard Kelly, head of global strategy at TD Securities, told CNBC that he would be ‘very hesitant’ to declare the end of the carry trade unwind.
He believes that the undervaluation of the yen and potential changes in interest rate differentials could lead to further market disruptions over the next one to two years.
Moreover, as Barclays analysts have indicated, the selling pressure from the carry trade unwind does not appear to have been fully exhausted. They warn that it’s ‘too early’ to call an all-clear on the unwinding and that volatility is likely to remain elevated.
For the crypto market, these lingering risks pose twofold challenges: a strong yen could drive investors away from high-yielding but risky assets, while at the same time, a sharp market correction could erode the confidence of crypto investors.
What’s happening in the market?
As the crypto market faces turbulent times, Bitcoin is encountering its own set of challenges. According to Copper Research’s “Opening Bell” report, Bitcoin’s recent performance has been lackluster.
Despite showing resilience against the German government’s sale of 40,000 coins, Bitcoin has struggled to regain the momentum it had in March when it reached its all-time high.
The report highlights that overall market conditions have been tough, largely due to a series of global events, including the U.S. election, UK riots, Middle East tensions, and shifts in Japanese central bank policy.
What’s particularly noteworthy is the lack of buying activity in Bitcoin. Initially, when the German sell-off occurred, some market participants bought the dip, seeing it as an opportunity.
However, recent market volatility has scared off many investors, resulting in minimal buying activity for Bitcoin.
Yet, there is a silver lining. Recent data shows a noticeable uptick in inflows into Bitcoin and Ethereum ETFs (ETH) over the last two days.
And after dust settled on the downturn in btc last 2wks (altho it came back a bit) the YTD net total flows are at an ATH of +$19b which is surprisingly strong all things considered (again this number is most imp metric to measure success IMO bc net price moves and GBTC unlock). pic.twitter.com/AuJ189ttVw
On August 13, the 12 spot Bitcoin ETFs recorded total inflows of $38.94 million, a nearly 40% increase from the $27.87 million recorded the previous day.
Leading the charge was BlackRock’s IBIT fund, which saw $34.6 million in inflows, bringing its total to a staggering $20.36 billion since its launch.
Ethereum also saw a surge in interest. The nine spot Ethereum ETFs recorded net inflows of $24.3 million on August 13, a jump from the modest $5 million recorded the previous day. BlackRock’s ETHA fund was at the forefront, with $49.1 million in inflows following a day of no activity.
What to expect next?
The current data suggests that the market is at a critical juncture, raising the question: where do we go from here? One thing is certain: Bitcoin’s next move could define the direction of the entire crypto market in the coming weeks.
Michaël van de Poppe, a well-known crypto analyst, recently noted that Bitcoin is in a choppy phase, with its immediate future hinging on whether it can hold above the $56,000 to $57,500 range.
It’s a big macroeconomic week as we’ve got PPI, CPI, and more data.#Bitcoin is relatively choppy; from a lower timeframe TA perspective, I’d want to see #Bitcoin stay above $56-57.5K and rally from there toward the other side of the range.
He suggests that if Bitcoin manages to stay within this zone, there’s potential for a rally toward the upper end of the range, possibly leading to a new all-time high.
Meanwhile, the increase in inflows to Bitcoin and Ethereum ETFs indicates that institutional investors are still interested, albeit cautiously. However, if volatility continues, we might see more sideways movement or, worse, another dip.
For now, it’s a waiting game. If the macroeconomic environment stabilizes, Bitcoin could break out of its current range and make a run for new highs. Therefore, stay cautious, trade wisely, and never invest more than you can afford to lose.
The Ondo Finance token retreated by over 6% on Tuesday as traders focused on the upcoming U.S. Consumer Price Index (CPI) data.
Ondo (ONDO) was trading at $0.7345, down 50% from its highest point this year, bringing its market cap to $1 billion.
The biggest macro news of this week will be Wednesday’s U.S. CPI data, which is crucial to the Federal Reserve’s dual mandate.
The average estimate among economists is that the headline CPI rose from -0.1% in June to 0.2% in July, while the core CPI moved from 0.1% to 0.2%. If these estimates are accurate, it will break a three-month trend where inflation had been retreating.
The CPI is expected to remain steady at 3.0%, while the core CPI is projected to have slightly decreased to 3.2%. These figures are still above the Federal Reserve’s target of 2.0%, suggesting that inflation is proving more stubborn than expected.
Despite this, the Fed seems to be taking a labor-first approach, focusing on the deteriorating job market, with the unemployment rate rising to 4.3%.
As a result, the odds of a Fed rate cut in September have increased in recent weeks. The debate now centers on the size of the cut, with the CME FedWatch showing a 51% probability of a 0.50% cut and the remainder predicting a 0.25% reduction.
Ondo Finance is exposed to Fed cuts
Federal Reserve interest rate cuts will impact all cryptocurrencies and stocks, but Ondo Finance may be particularly vulnerable due to its business model, which relies heavily on interest rates.
Ondo provides a tokenization platform where investors can purchase U.S. Dollar Yield (USDY) and U.S. Treasuries assets (OUSG). Holders of USDY and OUSG earn rewards every month.
USDY has an annual return rate of 5.35%, while OUSG yields 4.96%, making them more attractive than traditional stablecoins like Tether (USDT) and USD Coin (USDC). These yields are generated by investing in bank deposits and short-term U.S. Treasuries.
Ondo Finance’s assets have grown, with USDY and OUSG holding $342 million and $226 million in assets, respectively. However, recent data from DeFi Llama shows that the rate of growth has slowed.
Ondo DeFi TVL growth has stalled | Source: DeFi Llama
Given this, Ondo’s ecosystem could shrink when the Fed starts cutting interest rates, as investors may seek higher-yielding assets elsewhere.
This trend is also expected to affect the broader money market fund industry, which has accumulated over $6.1 trillion in assets as investors capitalize on higher interest rates. Nevertheless, USDY and OUSG tokens are likely to remain more appealing than Tether and USDC, which don’t pay interest, suggesting that any outflows might be gradual.
There is often a disconnect between a blockchain’s fundamentals and its token price. For instance, Arbitrum (ARB) has a market cap of $1.9 billion while Cardano (ADA) is valued at $12 billion. Arbitrum has a highly engaged ecosystem, with its DEX platforms having the third market share after Ethereum and Solana. Cardano, on the other hand, does not have an active ecosystem in DeFi and other industries.
Given this, there is a possibility that the Ondo Finance token could rebound even if investors start moving out of its USDY and OUSG assets.
Cryptocurrency prices rose for the fourth consecutive day as concerns about a US recession faded after encouraging jobless claims data.
It was a sea of green as Bitcoin (BTC) and most altcoins, which have risen by over 30% from their lowest point this week.
US inflation report ahead
One of the main catalysts driving the recent crypto and stock rally was the US jobless claims report on Aug. 8. According to the Bureau of Labor Statistics, the number of claims dropped to 233,000 in the prior week. A week before that, the claims rose to 250,000, the highest level in months.
These numbers came a week after the non-farm payrolls report showed that the jobless rate rose to 4.3%, the highest level since 2021.
Therefore, Aug. 15 will be important for the crypto industry as the US will publish the latest Consumer Price Index (CPI) report. Economists polled by Reuters expect the data to show that the headline CPI dropped from 3.0% to 2.9% in July. The core CPI, which excludes volatile food and energy prices, is expected to drop from 3.3% to 3.2%.
Bitcoin and altcoins could benefit from Fed cuts
A sign that inflation is falling will benefit Bitcoin and altcoins because of its impact on the Federal Reserve.
In its monetary policy meeting in July, the Fed hinted that it would consider cutting rates in its September meeting. Analysts are now divided on whether the first cut will be 0.25% or a jumbo 0.50%.
Some, like those from ING Bank and Citi, expect a 0.50% cut while others from Goldman Sachs and Societe Generale see a 0.25% reduction. A Polymarket poll also predicts several rate cuts this year.
Cryptocurrency prices tend to do well when the Federal Reserve is cutting rates. The most recent example is in March 2020 when the Fed slashed the official cash rate to zero due to the pandemic. In the aftermath, Bitcoin rose to a record high of $69,000 in 2021.
Before that, Bitcoin rose by 90% in 2019 as the Fed cut rates in July, September, and October. Conversely, Bitcoin dropped by 65.2% in 2022 as the Fed hiked rates, with other altcoins faring even worse.
One reason why cryptocurrencies might do well when the Fed starts cutting rates is the significant amount of money in the bond market. Money market funds currently hold over $6.2 trillion, where investors are earning over 5% annually.
When rates start falling, these funds will likely shift to riskier assets like stocks and cryptocurrencies.
Crypto markets jumped on June 12 after U.S. CPI numbers for May came in flat, fueling expectations for promising inflation data.
U.S. Consumer Price Index (CPI) data was unchanged last month, down from 0.3% in April. The year-over-year (YoY) CPI also dropped from 3.4% in April to 3.3% in May, besting predictions that data would remain the same.
Core CPI YoY levels declined from 3.6% to 3.4% last month, the lowest rate since April 2021. The general consensus estimated a 3.5% point for this index.
Following the improved data, the total crypto market cap grew by 3% to reach .65 trillion, per CoinGecko. Bitcoin (BTC) broke a two-day red streak with a 4% surge, leaping above ,300, while Ethereum (ETH) increased by nearly 3% to ,639 at the time of writing.
Other digital assets ranked in the top 10 tokens, like BNB, Solana (SOL), XRP, Dogecoin (DOGE), and Toncoin (TON), also posted modest gains on the day.
Top 10 digital assets jump on CPI data | Source: CoinGecko
Softer inflation data could buoy crypto prices
A QCP Capital report suggested that crypto traders and investors anticipated cooler inflation data from the forthcoming Federal Open Market Committee (FOMC) meeting.
The firm noted “aggressive buying” of June 13 calls and increased funding rates, indicating market positioning for an upside move.
“A neutral FOMC outcome could propel the crypto market to retest its highs once more,” said QCP Capital analysts.
Cryptocurrencies and risk assets could see liquidity inflows if the Fed mirrors decisions from other apex banks. Recently, the European Central Bank and the Bank of Canada slashed rates. The U.S. dollar index (DXY) rose to a 30-day high following the news, meaning more capital became available for investments.
