Jito (jto) 
Cryptocurrency prices have risen for the fourth consecutive day as concerns about a US recession diminished following encouraging jobless claims data. Bitcoin and most altcoins have surged by over 30% from their lowest point this week.
US Inflation Report Ahead
One of the main factors 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, down from 250,000 the week before, which had been the highest level in months. These figures came just a week after the non-farm payrolls report showed the jobless rate had increased to 4.3%, the highest level since 2021.
Aug. 15 will be crucial for the crypto industry as the US will release the latest Consumer Price Index (CPI) report. Economists 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 anticipated to decline from 3.3% to 3.2%.
Impact of Falling Inflation on Cryptocurrencies
A sign that inflation is decreasing will benefit Bitcoin and altcoins due to its effect on the Federal Reserve. In its July monetary policy meeting, the Fed hinted at potential rate cuts in its September meeting. Analysts are divided on whether the first cut will be 0.25% or a larger 0.50%.
Some analysts from major financial institutions expect a 0.50% cut, while others predict a 0.25% reduction. A Polymarket poll also forecasts several rate cuts this year. Historically, cryptocurrency prices tend to perform well when the Federal Reserve cuts rates. For instance, in March 2020, the Fed slashed the official cash rate to zero due to the pandemic, leading Bitcoin to reach 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 increased rates, with other altcoins faring even worse.
One reason cryptocurrencies might perform 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.
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