Market wrap: Bitcoin rallies despite colder inflation data

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The Labor Department reported on Wednesday that the consumer price index posted a 0.5% month-over-month gain, up from a 0.9% increase in June. The price is up 5.4% from a year ago level.

Despite colder but still high inflation data in July and the passage by the US Senate of a $ 1,000 billion infrastructure bill that could impose some taxes and restrictions on the cryptocurrency industry , the price of bitcoin climbed to $ 46,502 on Wednesday, its highest level since mid-May, with retail investors returning to the market. The cryptocurrency was trading at $ 46,433 at the time of publication, up 2.45% on the day.

The market does not expect the wording of the Senate bill to progress as it does in the House and in the law, which I also agree with, Jeffery Wang, Head of the Americas at Amber Group, wrote to CoinDesk in an email. I think once that’s said and done we’ll have rules that are more acceptable to the crypto industry. ”

Latest prices

S&P 500: 4,447.7, + 0.25% Gold: $ 1,752.4, + 1.35% The 10-year Treasury yield closed at 1.332%, up from 1.347% on Tuesday

Bitcoin has taken a head start in recent weeks. In our previous notes, we had forecast a rally through mid-August, wrote Pankaj Balani, CEO of Delta Exchange, in an email to CoinDesk.

We think the market should blow here. We expect the price to consolidate for some time in the $ 40,000- $ 45,000 range before taking decisive action in late August, early September, Balani wrote. Volatility continues to trade at a high level and it is interesting to write the rise beyond 50K for August and September.

Meanwhile, the total cryptocurrency market cap has surpassed $ 2 trillion for the first time since May, according to CoinGecko.

Bitcoin Traders May Be More Focused On Inflation Than Crypto Taxes

The passage by the US Senate of a $ 1 trillion infrastructure bill this week with measures considered to be onerous for the cryptocurrency industry has done little to stop the Bitcoin’s nearly 60% price hike in recent weeks.

Perhaps this is because the latest steps taken by lawmakers in the world’s largest economy illustrate the lack of appetite among senior officials to curb the high spending that has fueled a rise in US government debt to levels. unprecedented over $ 28 trillion.

Crypto traders could bet that the additional spending could boost inflation, potentially strengthening bitcoin’s appeal as a bulwark against the dollar’s degradation. The Federal Reserve has created trillions of dollars in the wake of the coronavirus pandemic to help absorb additional borrowing from the US Treasury; the central bank’s holdings of treasury bills have increased by about $ 3 trillion since early 2020, to reach $ 5.3 billion last week.

And despite speculation that the Fed may cut its bond purchases by $ 120 billion per month later this year (including $ 80 billion per month in U.S. Treasuries), the central bank may need to fund additional public borrowing. The Congressional Budget Office predicted in July that budget deficits over the next decade could total $ 12 trillion, raising the government’s debt burden, expressed as a percentage of gross domestic product, to 106 percent, from by 2031. Ten years ago, that ratio was just 63%.

Source: Federal Reserve

The CBO said the bipartisan infrastructure bill could inflate projected deficits over the next decade by an additional $ 256 billion. This equates to four more months of Fed Treasury buying at the current rate.

And there could be further upward pressure on budget deficits after the Democratic-led Senate on Wednesday approved a $ 3.5 trillion budget framework with provisions for additional spending on family services, health. and environmental programs. According to the New York Times, the effort could “create the largest expansion of the federal safety net in nearly six decades.”

Much of this has been in the works for some time. Last year, the price of bitcoin quadrupled when then-presidential candidate Joe Biden defeated President Donald Trump in a Democratic government takeover billed as the ‘blue wave’. But there is a growing feeling now that America’s finances may be reaching a point of no return.

“You are putting in place a government that no one can afford to pay,” South Carolina Republican Senator Lindsey Graham said, according to The New York Times.

Based on the trend of the past few years, the Federal Reserve could end up paying a lot of it by printing money.

Speaking of inflation

The US consumer price index jumped 5.4% in the 12 months to July, the same pace as in June and slightly exceeding the 5.3% increase expected by economists, a the Labor Department reported Wednesday.

While the latest 12-month increase is on par with the fastest inflation in more than a decade, some analysts have seen the stabilization as a sign that the price pressures resulting from the reopening of the economy may well endure. mitigate.

“While I don’t think a slight dip is a game-changer, when it comes to monetary policy it might have been if we had continued to see acceleration or evidence of more worrying price pressures. instead, we can all breathe a little easier, ”wrote Craig Erlam, senior market analyst for brokerage firm Oanda, in an email.

The July CPI report is unlikely to have a major influence on the Federal Reserve’s high-level discussions about when and how quickly to start reducing its unprecedented monetary stimulus. In recent months at the Federal Market Open Committee (FOMC) press conference, Fed Chairman Jerome Powell noted that the central bank was aiming to make gains in its goal of reaching a maximum of jobs before being reduced.

Many bitcoin traders are closely following the headline inflation figures in case the digital asset becomes an inflation hedge due to its limited supply cap at a time when the dollar may lose some of its value. purchasing power.

Source: United States Bureau of Labor Statistics

Hacker giving back money?

An address associated with the hacker who emptied Poly Network of potentially hundreds of millions of dollars on Tuesday has started returning the funds, reports Eliza Gkritsi of CoinDesk.

The transfers came after Poly Network first mobilized to blacklist the exploiter’s wallet addresses, and then set up multi-signature addresses to receive the returned funds.

One surprise is that the news of the feat hasn’t shaken the digital asset markets too much.

“Reports late last night of a $ 600 million hack did nothing to shake sentiment in the cryptocurrency space, despite being the biggest hack in history,” he said. writes Erlam from Oanda. “While this is a massive story, it seems traders weren’t concerned, something we might not have seen a few years ago.”

Blockchain research firm Chainalysis published its own analysis: “While we certainly wouldn’t expect every cryptocurrency hack to end with the return of funds stolen by the attacker, in this case it appears that Poly Network will get its money back and also discovered a significant vulnerability. his team can now patch up. Ultimately, the ecosystem will be stronger for it, ”the report says.

Altcoin balance sheet

Cake Wallet Enables Readable Usernames: Unstoppable Domains, a blockchain domain provider, now allows Cake Wallet users to create custom usernames for their wallet addresses. Launched in 2018 as the first free and open source wallet for monero private currency on IOS, Cake Wallet has expanded to include Android apps and support for bitcoin, litecoin, ether, and Cardanos ADA. The wallet retains some of the fundamental features of traditional portfolios, such as an integrated exchange and support for the fiduciary view. Rather than using an ambiguous 32-bit string (on the visible layer at least), Cake Wallets 150,000 users will be able to create usernames under the “[NAME].crypto format “.

Ghana to test CBDC with German banknote printer: The Bank of Ghana plans to test a central bank digital currency (CBDC) in partnership with German banknote printer Giesecke & Devrient. The central bank said on Wednesday that Giesecke & Devrient would provide the technology for the currency, the digital cedi. Munich-based Giesecke & Devrient offers printing services for banknotes and securities as well as cash management systems.

Relevant news:

Other markets

Most digital assets on CoinDesk 20 increased on Wednesday. In fact, everything was in the green except for the dollar-linked stablecoins.

Notable 9:00 p.m. UTC (4:00 p.m. ET) winners:

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