Bitcoin is down about 1% today after retracing to just above $41,000, wiping out some of the bullish gains made earlier this month. However, there is still significant altcoin activity in the markets. Given their increasingly long-tail rally leading up to the holiday season, cryptocurrencies didn’t need another springboard to propel them higher. But that’s exactly what happened on Tuesday when the latest macroeconomic data hit the headlines.
As a result, the prices of an impressive variety and number of coins and tokens skyrocketed. Cosmos Hub (CRYPTO: ATOM) was one of them, rising 19% in midday trading. KuCoin (CRYPTO: KCS), which rose by roughly the same percentage, Aptos (CRYPTO: APT), which rose by 14%, and Fantom (CRYPTO: FTM), which rose by a relatively light but still solid 7%.
Inflation Is Still Cooling
The information that made cryptocurrency investors happy was about the current global albatross, inflation. The government’s Labor Department released November figures for the United States early Tuesday. Consumer Price Index (CPI), a closely monitored gauge of the prices of essential goods (and thus a yardstick for inflation). According to these figures, the CPI increased by 3.1% year on year and by 0.1% over the previous month.
While this more or less met economists’ expectations, many saw it as evidence that inflation is still cooling. After all, the year-over-year increase in October was 3.2%. Although such a cooling does not imply that inflation is completely under control, it is a good sign that it is on the right track.
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Trade with Caution
The significance for crypto enthusiasts stems from the potential impact on the Federal Reserve’s monetary policy. A slowing or reduction in inflation may relieve the Fed’s pressure to raise interest rates, and in the best-case scenario, they may even consider rate cuts. Traditional safe-haven investments such as bonds offer diminishing returns in a low-interest environment, making riskier assets such as cryptocurrencies more appealing to investors.
However, caution is advised in the midst of the excitement. Cryptocurrencies, which are notorious for their volatility, are vulnerable to sudden market shifts. The price increase, while driven in part by positive macroeconomic indicators, also reflects the speculative nature of the cryptocurrency market. Investors are reminded to tread carefully and selectively in this volatile environment.
Final Thoughts
To sum it up, the recent rally why Cosmos Hub (ATOM) and other altcoins were soaring demonstrates the interdependence of macroeconomic trends and the cryptocurrency market. As investors navigate these choppy waters, keeping an eye on economic indicators and being selective with cryptocurrency investments will be critical in capitalising on potential opportunities while mitigating risks.
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