Crypto markets wrought ahead of US inflation data as regulatory issues steal focus

Quick Take

  • Bitcoin was trading around $21,620, down 0.7% over the past 24 hours. 
  • Crypto markets have been dictated by regulatory issues recently, but January’s inflation figures take center stage tomorrow.

Crypto markets were roiled by the SEC last week, and now there's even more uncertainty after the New York Department of Financial Services ordered Paxos to stop issuing BUSD. Next up is U.S. inflation data for January. 

Prices are expected to have climbed 0.4% month-on-month in January, and all eyes will be on the release for any sign of acceleration that could trigger fresh action from the Federal Reserve.

"I am committed to taking further actions to bring inflation back down to our goal," said Federal Reserve Governor Michelle Bowman, noting that while there has been a recent decline in some measures of inflation, "we have a lot more work to do." She said the Fed will continue to raise interest rates. 

Word on the street

"This week will be all about tomorrow's CPI numbers, and on the back of that huge payrolls print, the market will be on the hunt for signs that the inflation slowdown is itself slowing, or worse still, reversing," said Adam Farthing and Colin Howe of market maker B2C2. 

"Given that BTC and ETH are looking as if they may go into the numbers sitting on key supports at $21,500 and $1,500, respectively, high inflation numbers could trigger a large move lower. But given the hawkishness that has crept into consensus opinion since payrolls, one has to think that more benign numbers could trigger large buy flows," they added. "Either way, it feels like we could have a big move on this data point." 

The data will likely be perceived as bullish overall if the annual rate comes in around 6% or somewhere below, which could offset some of the regulatory-related selling, said Youwei Yang, chief economist at Bit Mining. 

"The opposing impacts of macro and regulation are playing the seesaw, where I see regulation has a greater effect than macro in short term, but macro will help in the long run," he said. 

BUSD sideshow 

Crypto prices were sent lower by regulatory developments, the New York Department of Financial Services ordering Paxos to stop issuing the BUSD stablecoin. Bitcoin fell on the news.

The leading cryptocurrency by market cap was down 0.7% over the past day, trading around $21,620 by 5 p.m. EST, according to TradingView data. 

Binance's BNB fell almost 9% over the past day, trading below $290. 

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