What does EU inflation mean for the crypto market?

This course analysis has been prepared in collaboration with the crypto exchange KuCoin. Centralized crypto trading platform KuCoin was launched in September 2017. It offers a variety of financial services such as margin and spot trading, P2P fiat trading, staking, futures trading and lending.

In the EU countries, inflation in September 2022 was 10.0 percent, in August it was 9.1 percent. This appears from the recently published Eurostat report. It also says that the level of inflation differs from country to country: in Germany, consumer prices rose by 10.9 percent, in France by 6.2 percent and in the Netherlands by as much as 17.1 percent (the highest inflation since the Second World War). ).

The biggest increase is in energy prices: 40.8 percent (against 38.6 percent in August), followed by food, alcohol and tobacco (11.8 percent, against 10.6 percent in August). The prices of services increased by 4.3 percent (against 3.8 percent). With inflation rising for several straight months, the European Central Bank (ECB) is likely to raise interest rates further.

In addition, the energy ministries in the EU have agreed to limit energy consumption and to demand surplus taxes from the energy companies.

Due to the current worsening of the economic crisis, more and more experts are predicting an even harsher winter for the cryptocurrency market. Bank of America strategist Alkesh Shah believes there will be no short-term rally for cryptocurrencies or any other risk asset due to the macroeconomic situation. The expert explained that volatile assets like cryptocurrencies struggle with high inflation and high interest rates. It would discourage potential investors from buying risky assets. This makes a significant rally highly unlikely.

Nevertheless, the acceptance of cryptocurrencies is increasing worldwide. According to President Kassym-Jomart Tokayev, Kazakhstan is considering legalizing a mechanism to convert cryptocurrencies into cash if there is demand. Kazakhstan is currently running a pilot project testing such solutions.

Bitcoin to over $19,000

Bitcoin (BTC) price has been small for the past 7 days, only up 0.9 percent for the week, according to Coinmarketcap. BTC posted a weekly low on Wednesday, September 28th at $18,500. It had hit its weekly high of $22,300 just a day earlier. Bitcoin is trading at $19,300 at press time, and its market cap is $369 billion.

BTC/USD Weekly Chart. Source: Coinmarketcap

Mike Novogratz remains bullish on Bitcoin and defended the largest cryptocurrency on Twitter. Galaxy Digital CEO believes BTC is still the best investment. Novogratz supports his claim by citing the decline in the value of fiat currencies such as the Argentine peso and Turkish lira, and the rise in the US dollar index, which recently rose to levels not seen in two decades.

Last week, the developers of the Lightning Network Alpha announced the launch of the Taro Daemon protocol. This makes it possible to mint, send and receive assets on Bitcoin’s Lightning Network. The protocol is the first step in the tokenization of the US dollar on the BTC network and allows users to trade stablecoins on the oldest cryptocurrency blockchain. The benefits of blockchain remain unchanged: instant, low-cost P2P transfers that do not require permission.

Merger hype expires: ETH continues to fall

The second largest cryptocurrency, Ether (ETH), continues to fall. The cryptocurrency has fallen 2.1 percent over the past week and is trading at $1,310 at press time, according to data from research house Coinmarketcap. Ethereum’s market cap is $160 billion.

ETH/USD weekly chart. Source: Coinmarketcap

The long-awaited merger didn’t do much for Ethereum, but it sent graphics card prices plummeting. GPU prices have fallen to historic lows. In the past, ETH miners in particular provided strong demand. Now that the network has switched to Proof of Stake (PoS), they no longer have any need for such hardware.

On Tuesday, Federal Reserve Chairman Jerome Powell called for “more appropriate” regulation of DeFi at a panel discussion. He believes that the interaction between DeFi and TradFi is “not that big right now”. However, the DeFi market continues to grow strongly and is attracting interest from retail investors. As often happens, without proper regulation, the industry can harm its investors, especially unprofessional investors.

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