Crypto 'Speed Bump' Scenario Predicted by Grayscale Head of Research

Grayscale Head of Research Zach Pandl says the latest U.S. inflation data could create a temporary setback for cryptocurrency markets.

This is due to the growing likelihood of the US Federal Reserve opting for another rate hike.

The August Consumer Price Index has revealed that inflation is hotter-than-expected. Headline CPI rose 0.4% month over month while the annual rate remained at 3.4%.

On an annual basis, however, core inflation eased to 2.4%, in line with forecasts and its lowest level since 2021.

A “speed bump”

Pandl described the combination as a potential “speed bump” for digital assets.

“High-ish core CPI means decent chance of Fed rate hike,” he wrote on X. “This is a ‘speed bump’ scenario for crypto.”

Pandl does not expect a severe cryptocurrency correction despite the looming fear of a rate hike.

He argued that any weakness would probably be limited. This could give investors who missed the sharp August advance another opportunity to build positions.

“In my opinion, dips will be shallow and will create an opportunity for allocators that missed the August price jump,” the Grayscale executive said.

Economist Robin Brooks called the report an unfavorable one for the central bank. Brooks has argued that the stronger inflation reading could push policymakers toward another hike.

Markets were pricing roughly an 85% probability of a hike shortly after the release.

Bianco Research founder Jim Bianco said that traders were assigning about a 90% probability to a rate increase.

Tighter monetary policy raises borrowing costs, which is why it is bearish for BTC.

Still, the inflation picture was not uniformly bearish. Core CPI’s annual rate continued to move toward the Fed’s 2% objective.

Analyst James E. Thorne has opined that the 2.4% annual reading is evidence that inflation remains on a longer-term downward trajectory.

Geiger Capital similarly noted that core inflation is now at its lowest level since 2021.

Bitcoin is currently changing hands at $78,772, CoinGecko data shows.