- The PCE price index rose 0.6% in January, 4.7% more than a year ago.
- Red hot inflation could tip the Fed to continue raising rates, which would impact the crypto market.
Inflation increased in January, which could push the Fed to continue raising rates, which could affect the cryptocurrency market. According to the Bureau of Economic Analysis (BEA), a US government agency, the Personal Consumption Expenditures (PCE) price index rose 0.6%, up 4.7% from a year ago.
Read Bitcoin [BTC] Price prediction 2023-24
Why PCE Is a Great Trigger Even for Crypto The Fed reportedly prefers PCE to the Consumer Price Index (CPI) for measuring inflation. One of the main reasons behind the preference for PCE is its broader reach and its ability to gauge the strength of the economy.
It also tracks how price changes influence spending behavior. In addition, the PCE Price Index (PCEPI) tracks price changes and inflation over time.
On the other hand, the CPI does not take into account the difference in household spending patterns and hardly takes into account price changes in rural or remote settings.
That said, it should be noted that the PCE and PCEPI increased by 1.8% and 0.6%, respectively, in January. It implies that the Fed may be in a position to consider raising rates further, confirming the longer-higher rate narrative that has fueled market uncertainty in recent days.
US Stock and Crypto Markets Performance After PCE Data US stock markets already closed in the red on Friday (Feb 24), as bearish sentiment swept the market. According to Google (NASDAQ:) Finance, and declined 1.69% and 1.05%, respectively.
Source: Total Cryptocurrency Market Cap on TradingView
The crypto markets were also in the red. (BTC) saw more than $45 million worth of long positions destroyed in the last 24 hours, according to Coinalyze.
Furthermore, BTC fell below $24K, and the total crypto market capitalization fell more than 3% in the same period, according to Coinmarketcap.
Collectively, the crypto market has fallen from $1.1 trillion to $1.02 trillion between Tuesday (February 21) and the time of writing, according to aggregated data from TradingView.
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What does March hold for cryptocurrencies? If the Fed takes a hawkish stance at the March meeting due to the high inflation rate in January, the recent uptrend could be halted. The crypto market could correct most of the recent gains seen in the last two months if BTC falls below the psychological level of $23K.
Simply put, the Federal Open Market Committee meeting in March could affect overall crypto market performance in the first quarter of 2023. A likely hawkish stance could undermine recent gains and tip bears to dominate the market.
