Crypto’s volatile week continues as inflation drops to 7.7%

Key receivers

Inflation rose 7.7 percent year-on-year in October. The figure was lower than analyst expectations of a 7.9% increase of 0.2%. The crypto market rallied on the news, but was still down sharply this week due to the FTX bankruptcy crisis.

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The Consumer Price Index fell by 40 basis points in October.

Inflation decreased to 7.7%

US inflation fell for fourth consecutive month.

The Bureau of Labor Statistics published its latest Consumer Price Index on Thursday, which found that inflation slowed to 7.7% in October.

The 7.7 percent figure represents a 40 basis point decline since the September publication. Inflation has been slowing since reaching a four-decade high of 9.1% in June, although the Federal Reserve has repeatedly made it clear that it expects inflation to return to 2%. Today's 7.7% figure was 0.2% lower than analysts' expectations of 7.9%.

The crypto market responded positively to the information. Bitcoin and Ethereum both jumped on the news that inflation has cooled more than expected. Although Bitcoin is still down 2% after the bump, Ethereum is up 5%. However, BBK has done little to repair the damage caused by the recent FTX bankruptcy crisis, which plunged it to a new annual low earlier this week.

Although inflation has been falling, it has remained stuck over the past few months, defying the Fed's best efforts to tame the numbers. The US central bank announced its fourth rate hike of 75-basis points on November 2, prompting another stock market sell-off. The Fed is widely believed to raise rates by 50 basis points at next month's Federal Open Market Committee meeting, bringing the funds rate to 4.25% to 4.5%.

As crypto investors have been calling for a Fed pivot for months, this week's FTX drama could have a more lasting impact than the US central bank's move. Even if the Fed reverses its stance toward a hike in the coming months, the potential contagion from the FTX collapse could send ripples through the industry for months. In addition, rumors of possible misappropriation of customer funds by FTX could do lasting reputational damage to an industry that has already faced skepticism from mainstream audiences and regulators. Although the macroeconomic situation has improved, trust and confidence in crypto has reached a new low due to the FTX crisis.

Disclosure: At the time of writing this piece, the author owned ETH and several other crypto assets.

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