By Omkar Godbole (All times ET unless indicated otherwise)
A real-time tracker of U.S. inflation is offering good news to crypto bulls as bearish forecasts continue to roll in.
The Truflation index, an independent, real-time blockchain-based tracker of daily changes in the consumer price index (CPI), has dropped below 1% for the first time since at least early 2021. The index has fallen from 2.67% since mid-December, taking it well below the Federal Reserve's 2% inflation target.
So while the official government reading stays 700 basis points above the Fed's target, the real-time level is showing fast disinflation, a scenario that supports the case for quick-fire interest-rate cuts by the bank.
That's good news for liquidity-sensitive assets such as bitcoin BTC$78,130.01, especially since the cryptocurrency is now trading 38% below the record $126,000 price from early October. The Truflation reading also contrasts forecasts of inflation resurgence by some analysts.
"As measured by Truflation, consumer price inflation has dropped to 0.86% on a year-over-year basis, breaking significantly below the 2-3% range in place for the past two years. In our view, inflation could turn negative, contrary to BlackRock and PIMCO forecasts," Cathie Wood, CEO of Ark Invest, said on X.
The good news doesn't stop there. Robin Brooks, a senior fellow at the Brookings Institution, who correctly warned of a worsening fiscal situation for Japan last year, predicted President Donald's Trump's pick for Fed chairman, Kevin Warsh, could cut rates by 100 basis points this year.
Let's see if these things offer relief to the crypto market. As of publication time, BTC is trading little changed around $78,000, with smaller tokens showing some recovery, as evidenced by the 2% gain in the CoinDesk 80 Index over 24 hours. Hyperliquid's HYPE and POL stand out as the only top-100 tokens with gains in excess of 10%.
Analysts remain optimistic about long-term prospects.
"In the near term, positioning in crypto does remain fragile. But structurally, ongoing institutional adoption, expanding use of stablecoins for cross-border settlement, and the rise of tokenized real-world assets should improve crypto market depth and interoperability," Emir Ibrahim, an analyst at digital asset trading firm Zerocap, told CoinDesk in an email.
"Over time, these dynamics are expected to reinforce Bitcoin's debasement hedge characteristics, even if the market is not yet fully pricing that narrative today," Ibrahim added.
In traditional markets, both the dollar index and Treasury yields are buoyant in the wake of Monday's strong manufacturing data. Stay alert!
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today
For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead".
For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead".
For a more comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead".
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Source: Farside Investors