The crypto community is currently eyeing the potential economic impacts of the upcoming July’s Consumer Price Index, set to be released on Thursday. This index, which serves as an indicator of inflation in the US, could influence the value of Bitcoin and other cryptocurrencies. As the index is projected to sit at 0.4%—a drastic shift from the year prior—such lower inflation could determine whether or not the Federal Reserve opts for a rate hike.
Oliver Rust of Truflation, an independent inflation data aggregator, envisages that this month will mark a surge in the CPI from 3% to 3.4%. According to him, the inflation slowdown in recent months has enabled consumers to reclaim their purchasing power through rising wages that outpace price growth. This shift has resulted in rampant consumer spending and contributed to price inflation in the essential food sector.
In other news, the Federal Reserve is initiating a novel program to supervise banks’ crypto-related activities. Although this move does not change the existing rules for crypto banking, it outlines the central bank’s supervision strategy. Accordingly, the banks’ dealings with the crypto sector will now be under the watch of the Federal Reserve’s specialized digital asset experts who will work in conjunction with regular regulators.
The Fed went beyond in detailing the prerequisites for banks to engage with stablecoins. As per the new direction, any institution conducting operations in dollar tokens to facilitate payments must ensure these operations are conducted in a “safe and sound manner,” subject to the Fed’s formal approval.
In an interesting development, Binance has acquired two operation licenses in El Salvador in a bid to reinforce its global legitimacy. The Central Bank of El Salvador and Salvadoran National Commission of Digital Assets issued the Bitcoin Services Provider license and non-provisional Digital Assets Services Provider license, respectively.
Increasing expectations of inflation, parallel to the belief that the Federal Reserve’s tightening cycle is ending, could potentially usher in a rate cut next year. The U.S. 5-Year, 5-Year Forward Inflation Expectation Rate, a measure of anticipated price pressures over the forthcoming five years, currently sits at 2.53%, its highest since April 2022. The twists and turns of the crypto market are, as always, closely aligned with broader economic happenings.
Source: Coindesk
