- The UAW started its biggest strike in decades on Friday morning.
- This strike will likely lead to higher inflation and slow US economic growth.
- Cryptocurrency prices could retreat depending on how long the strike lasts.
Cryptocurrencies have done modestly well this week, with Bitcoin rebounding above $26,000 and the market cap of all digital coins soaring to $1.06 trillion. This happened after Franklin Templeton applied for its spot Bitcoin ETF, joining other companies like Blackrock, Invesco, and WisdomTree that are waiting for their approvals.
Cryptocurrencies reacted mildly to the strong US retail sales and inflation numbers that raised the possibility of more Fed tightening. The headline consumer price index (CPI) jumped to 3.7% in August, the biggest increase in months. Retail sales continued soaring, signaling that the American consumer is still strong.
The next key macro news that will move cryptocurrency prices will be the UAW strike in the United States. More than 150k workers will go to a strike after negotiations with the Big Three auto companies failed.
These workers, through their unions, are seeking several things, including a 40% pay increase, healthcare coverage, and job guarantees. Auto companies like Ford, GM, and Stellantis believe that these requests are extreme. Stellantis has even warned that it will relocate manufacturing of its trucks to Mexico.
This strike will have a major impact depending on how it lasts. First, the automobile sector is a major job creator in the United States. As such, a long strike will hurt the economy, the three auto companies, and their suppliers.
Most importantly, this strike will lead to low new vehicle supplies in the US, which will lead to higher prices for new and used cars. Vehicles are some of the most important contributors of inflation in the US.
Higher inflation, also because of soaring crude oil prices, will force the Federal Reserve to consider hiking interest rates in the coming meetings. In most periods, cryptocurrency prices tend to underperform in a period of high-interest rates.
Meanwhile, millions of Americans are scheduled to restart paying their student debts later this month. And with the M2 money supply falling, there is a likelihood that these repayments will hit the economy and crypto prices.
Therefore, the outlook of key cryptocurrencies like Ethereum, Cosmos ATOM, Algorand, and Jasmy is bearish. These coins will likely see weaker demand as people move to the relatively safe and high-yielding US dollar.
Read more: How to buy Algorand.
According to Crane Data, money market funds by companies like Western Asset, Federated Hermes, State Street, and Allspring Heritage are yielding over 5.45%. As such, many people will likely move to these liquid and safe assets as hopes of more Fed hikes rise.
