All Eyes on CPI Reading Today as Institutions Take Profit

GB Market Commentary 12/04/2022

by Marcus Sotiriou

Bitcoin has shown weakness over the past week as it fell under $40,000 yesterday and has bounced from the key $39,500 level. The crypto fear and greed index has returned to 20 which is ‘extreme fear’ territory, meaning sentiment surrounding the markets is extremely pessimistic and negative.

In my opinion, this can mainly be put down to the current macro headwinds at hand. With soaring inflation, retail do not have enough money to invest significant amounts in what they deem as ‘risky’ assets like cryptocurrencies.

U.S. CPI data is being released today which will be a key indicator for the direction of the market over the next few months. The month-over-month inflation is expected to increase by 1.2% which is the largest month-over-month increase in over 40 years! This can largely be out down to the increase in gas and food prices however due to the Russia/Ukraine war, which means that the core inflation reading is key to watch out for, as this strips out gas and food would give the Federal Reserve the green light to continue hammering the market with aggressive policy.

Ahead of this key CPI reading we have been seeing institutions taking profits, as last week crypto funds suffered their largest outflow since January. These funds had $134 million in net outflows – this is a sharp turn after the heavy inflows seen in the previous two weeks. Cardano and Solana had inflows, of $1 million and $3.7 million respectively, whilst Ethereum had outflows of $15 million. I think this is down to institutions taking profits in preparation for the inflation reading today, which is the first reading to take into account the effects of the war.