Cryptos Muted Amidst A Mixed Global Inflation Picture

Cryptocurrencies are trading in mildly negative territory early on Thursday, amidst mixed inflation readings from the U.S. and deflation indications from China. The rate hike by the Bank of England and the continuing regulatory actions against the crypto industry in the U.S. dampened market sentiment.

Data released by the U.S. Bureau of Labor Statistics on Wednesday showed headline annual inflation dropping to 4.9 percent. Markets expected it to be steady at 5 percent. Also, core inflation edged down from 5.6 percent to 5.5 percent, in line with expectations. Month-on-month inflation however increased to 0.4 percent, from 0.1 percent in the previous month, exactly as the markets had feared. The sticky inflationary situation ignited fears of the Fed being unable to pause rate hikes as already indicated.

Data from China revealed a strikingly deflationary picture with headline annual inflation plunging to 0.1 percent in April, from 0.7 percent in the month of March. Markets had anticipated it to fall to 0.4 percent. Month-on-month inflation which was expected at 0 percent as compared to -0.3 percent earlier stood at -0.1 percent. Producer price inflation, which was seen declining to -3.2 percent from -2.5 percent, dropped still further to -3.6 percent. The deepening deflationary situation called into question the quality of post-pandemic rebound in China, triggering speculation about a global recession.

The Bank of England, in a widely anticipated move on Thursday raised rates by 25 basis points to 4.5 percent, progressing further in its fight against double-digit inflation.

The producer price inflation readings from the U.S. for the month of April are due on Thursday morning. Markets expect the same to rise to 0.3 percent from -0.5 percent in the previous month.

Meanwhile in the continuing regulatory enforcement in the U.S. crypto industry, Marathon Digital, a Bitcoin miner said it has received a subpoena from the U.S.SEC related to an investigation of a Montana data center that could involve potential violations of securities laws. Bloomberg quoted the company’s filings stating it received an additional subpoena from the SEC on April 10, 2023, relating to, among other things, transactions with related parties. The company said it was cooperating with the SEC.

Amidst the contrasting developments, overall crypto market capitalization dropped to $1.13 trillion, from $1.14 trillion a day earlier.

Bitcoin dropped below $27k for the first time since end of March 2023. The lead cryptocurrency is currently trading at $27,532.06, after losing 0.7 percent overnight and 5.7 percent in the past week. Year-to-date gains have fallen to 66 percent.

Ethereum too declined 1.3 percent overnight and 4 percent in the past seven days to trade at $1,829.56. The leading alternate currency touched a low of $1,795.67 in the past 24 hours.

21st ranked Cosmos (ATOM) gained more than 4 percent in the past 24 hours to trade at $10.88.

65th ranked Pepe (PEPE) dropped 16 percent overnight but is still holding on to gains of less than 2 percent on a weekly basis. Market cap of the meme token has fallen from $1.5 billion on May 5 to $642 million currently.

In another instance of meme fest, Milady Meme Coin (LADYS) ranked 2623rd among all cryptocurrencies surged close to 5,000 percent in the past 24 hours, tracking wild gains in the unrelated Milady NFT collection triggered by Elon Musk tweeting an anime character from the NFT collection.

In more regulatory news, the U.S. House Financial Services Subcommittee on Digital Assets, Financial Technology & Inclusion held a joint hearing on Wednesday with the House Agriculture Committee’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development titled “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Asset Markets.” The rare joint committee hearing stressed on the need for new crypto rules. Rep. Patrick McHenry, the Republican chair of the House Financial Services Committee called upon the SEC to modify its rules for broker dealers and securities exchanges. He also added that SEC disclosure rules should be modified for digital assets that fall under its regime. He also argued that the CFTC needed more authority to regulate non-security digital assets, like Bitcoin. Rep. Maxine Waters called for regulation for stablecoins, increasing the SEC’s ability to go after overseas firms, and giving the CFTC more power over spot markets for digital commodities like Bitcoin.

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