Cryptocurrency markets experienced a turbulent August influenced by tariffs, inflation, and actions by the Federal Reserve.
Causes of Cryptocurrency Decline
The release of Federal Reserve minutes, the start of the Jackson Hole Symposium, and Chairman Powell’s remarks collectively created a challenging environment, curbing risk appetite. While some Federal Reserve members advocated for rate cuts, only two members expected reductions, awaiting a consensus among the seven-member group.
Possibilities for Risk Appetite Recovery
The prospect of a significant Ethereum rally offered a glimmer of hope amidst a grim market outlook. However, Ethereum fell $80-$100 short of reaching a new peak. Despite former President Trump’s advocacy for rate cuts, anticipated inflation spikes inhibit the possibility of multiple reductions this year.
Future of Cryptocurrencies Considering Tariffs and Inflation
As inflation rises and employment cools, the PPI hints at a looming Consumer Price Index (CPI) increase. Tariffs initiated on August 1st exceeded the base rate, potentially boosting customs revenue to $40 billion. The outlook for September, reflecting August’s data, doesn’t appear promising. While FedWatch suggests an 85% likelihood of a rate cut, it is expected no sooner than April 2026. The escalating tariffs are likely to continue to impact inflation.
The prevailing indicators point towards a cautious Federal Reserve stance as tariff-inflation dynamics continue to challenge the economic equilibrium, influencing the future trajectory of cryptocurrencies.
