The crypto market is going through a bit of turbulence right now.
And by turbulence I mean: if you’re looking at the charts today, maybe keep a napkin nearby – might shed a tear or two 🥲
Soo, what’s going on? In short: optimism got a little too far ahead of reality.
Over the past few weeks, traders had built up large leveraged positions, assuming crypto would keep going up – mostly because they expected the Fed to cut rates.
The cut did happen, which on its own is bullish for crypto.
But then Fed Chair Jerome Powell started sending mixed signals about what comes next. He hasn’t committed to being aggressive with future cuts, and that uncertainty makes markets nervous.
Prices started decreasing, all those leveraged positions started hitting their limits, which triggered billions in liquidations and dragged the whole market even lower.
That’s why US economic data matters so much rn.
Yesterday, strong GDP and jobless claims numbers showed the economy is holding up well – which gives the Fed less reason to rush into more cuts.
And today brought two more important updates:
1/ PCE report
Aka the Fed’s favorite inflation measure.
👉 Headline PCE came in at 2.7%, exactly as expected, but slightly higher than last month’s 2.6%;
👉 Core PCE, which excludes food and energy, remained at 2.9%, also right on forecast.
Translation: inflation isn’t getting worse, but it’s also not cooling off either.
2/ Michigan consumer data
Basically a check-in on how US households feel about the economy rn and where they think it’s headed.
It matters because consumers drive about 2/3 of US economic activity – if people are confident, they spend more and support growth; if they’re nervous, they pull back and slow things down.
And the latest results showed that:
👉 People feel less confident about current conditions;
👉 Expectations for the future fell, too;
👉 The only bright spot was inflation expectations – people believe inflation will ease a bit over the next year.
Put it all together:
👉 GDP and jobless claims said: the economy is strong;
👉 PCE said: inflation is steady, not cooling further;
👉 Michigan survey said: consumers don’t feel great, but they do expect inflation to ease a bit.
For the Fed, this could mean no urgency to cut rates ASAP – the economy isn’t weak, and inflation hasn’t cooled enough. But we’ll see.
For crypto, it explains the sideways action. But weak consumer sentiment and softer inflation expectations keep hopes alive that cuts will eventually come.
Overall, this combo of liquidations and macro worries means the market is likely to remain volatile.
