At its meeting on July 26, the Fed took its aggressive rate hikes to the highest level in 22 years. With rising interest rates, the US has been raising expectations for the Consumer Price Index (CPI) for a while. So how do these lay the groundwork for Bitcoin?
White House raises CPI inflation forecast
The White House revealed its Consumer Price Index for All Urban Consumers (CPI-U) forecast for the fourth quarter early last March. At the time, the Biden administration thought that 2023 inflation would stay at 3.0%, while in 2024 the same rate would fall to 2.3%.
However, his views are changing after the recent banking crisis and the Fed’s increase in interest rate target to 5.25%-5.50%, a 22-year high. According to reports, the White House now forecasts inflation to rise to 3.3% in 2023 and to 2.5% in 2024.
The reason this worries the economy is that the 2.3 percent CPI-U inflation rate is said to be in line with the Central Bank’s 2.0 Personal Consumption Expenditures (PCE) Price Index. Therefore, it was worrisome whether a rise in the CPI-U meant that the Fed would raise its PCE target.
The timeline it gave was for 2025, although the central bank has repeatedly stated that it is committed to reducing inflation to its 2% target. That leaves the 2024 target potentially more than 2%. In July 2023, the annual CPI increased by 3% year on year, down from the 9.1% peak in November 2022.
But while an increase in inflation could be dangerous for the US Dollar Index, it could be beneficial for Bitcoin, which has seen a lot of support lately.
New US presidential candidates and lawmakers support cryptocurrencies
Recently, US lawmakers supported the development of rules and regulations for the crypto market. Indeed, earlier this week, the House Financial Services Committee passed a new bill. The law in question protects the custody rights of Bitcoin and other cryptocurrencies. The bill, known as the “Hold Your Cryptocurrency 2023 Act,” removes restrictions on personal retention.
In addition, the positive atmosphere was reflected in the perspectives of the lawmakers beyond the draft laws and regulations. An example of this lies in the statements of US Congressman Patrick McHenry. McHenry stated this week that Bitcoin is a “financial revolution.”
McHenry’s prominent statements included the following statements:
Terms like cryptocurrencies, Blockchain technology, and digital asset ecosystem are now part of the daily lexicon for millions of Americans and people around the world. This is a software revolution and a financial revolution if done right.
What’s next for Bitcoin?
Despite the pressure from the SEC and CFTC, the positive statements in the US congress gave the markets a sigh of relief. However, Bitcoin and the general market are not yet happy with the latest developments. Bitcoin price is struggling to stay above $29,000 as it loses the momentum it gained in July. The 10,000 BTC flowing to exchanges today, which we quoted as Kriptokoin.com, raises concerns.
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