Cryptos Muted As Producer Price Growth Adds To Fed Fears

Cryptocurrencies remained close to the flatline, early on Wednesday, amidst a higher-than-expected reading of producer price growth in the U.S. The producer price growth triggered fresh anxiety on the Fed’s resolve to tame inflation.

Data released just a while ago showed the Producer Price Index, a reflection of price pressures from the perspective of sellers increasing to 0.4 percent in September, versus the previous month’s reading of -0.2 percent and expectations of 0.2 percent. The core PPI, excluding food and energy, was steady at 0.3 percent.

The consumer price inflation (CPI) readings which measures price changes from the purchaser’s perspective are due to be released on Thursday. The FOMC minutes to be released later in the day is expected to reveal the extent of the Fed’s commitment to controlling the stubborn inflation.

Overall crypto market capitalization is at $922 billion, dominated 39.8 percent by Bitcoin and 17.3 percent by Ethereum.

While Bitcoin gained 0.72 percent, Ethereum managed to rally, with overnight gains of more than 1.64 percent. Bitcoin is currently trading at $19,105.91 whereas Ether is trading at $1,297.55.

48th ranked Huobi Token (HT) gained 22 percent in the past 24 hours. HT has surged around 57 percent in the past week.

98th ranked Terra (LUNA) added 12.6 percent overnight, closely followed by 37th ranked Hedera (HBAR) which gained 7 percent.

74th ranked TerraClassicUSD (USTC) declined 18 percent overnight whereas 38th ranked ApeCoin (APE) dropped 7 percent in the past 24 hours.

The IMF, in its Global Financial Stability Report titled ‘Navigating the High Inflation Environment’ has noted that the world economy is experiencing stubbornly high inflation, a challenge it has not faced for decades. The IMF report states that global financial stability risks have increased since the issuance of the April 2022 report. The report recalls the sharp sell-off in risk assets through June on fears that central banks would have to step up the pace of policy rate hikes to fight high inflation.

The IMF report recalls that amid rising correlation with equities and poor market liquidity, crypto markets experienced extreme volatility leading to the collapse of some of the riskiest segments and the unwinding of some crypto funds.

The Global Financial Stability Report notes that the correction in crypto asset markets has added extra urgency to the call for comprehensive and consistent regulation and adequate supervision. Policymakers need to address risks to users and investors, to market and financial integrity, and to macro-financial stability, the report adds.

The IMF is also of the opinion that the regulatory framework should cover all critical activities and entities. The report specifically mentions that crypto asset service providers that deliver core functions and generate key risks should be licensed, registered, or authorized. These inter alia include entities related to the storage, transfer, exchange, and custody of reserves. Following the principle of “same activity, same risk, same regulation”, the report calls for regulation similar to that of financial service providers. IMF also believes that strong international cooperation is essential to provide guidance, ensure consistent implementation, and contain spill-over risks.

Meanwhile, Valkyrie Funds LLC, a specialized alternative financial services firm that aims to provide exposure to the digital economy through traditional financial vehicles, on Tuesday announced plans to liquidate the Valkyrie Balance Sheet Opportunities FUND (Nasdaq: VBB), one of the exchange traded funds (ETFs) it manages. The Fund has holdings in Tesla, MicroStrategy, Block, Globant, Blackrock, Coinbase Global etc. The Fund’s Year-to-date performance exceeded a loss of 50 percent.

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