This week might bring cryptocurrency investors one of the biggest spikes in volatility as three major events that heavily influence digital assets will happen in the next few days, starting from Tuesday.
CPI Data release
With another release of inflation data, the market will receive a direct signal about the upcoming changes in the monetary policy of the United States, which affects the crypto market heavily.
If inflation data remains below market expectations, financial regulators around the world should ease up on actions that work against risk-on assets like cryptocurrencies. If the opposite scenario commences, we will most likely see another plunge.
The hottest topic in the cryptocurrency industry does not need any additional coverage. The fundamental change in the biggest ecosystem on the cryptocurrency market will certainly have an effect on the market, as we are already seeing a lot of movement on the crypto market-related scenes: liquidity providing platforms, borrowing and lending markets and high activity on mining pools.
At press time, Ethereum's volatility remains in the average range, with the price of the coin showing a mild retrace after rallying by 22% recently.
Yet another rate hike should not be a surprise for either the financial or cryptocurrency markets, as the actions of financial regulators around the world have already been priced-in by the market previously and should not cause a volatility spike.
The only scenario in which we are going to see a sudden jump in volatility is unexpectedly high inflation numbers that will cause a 100 bp rate hike, which is 25 bp higher than that expected by most market participants.