- Bitcoin and Ethereum have remained in a consolidation phase recently.
- Altcoins like ICP, GMX, Sui, and Filecoin jumped on Tuesday.
- This happened after the US published strong consumer price index data.
Cryptocurrency prices were mixed on Tuesday after the latest US consumer price index (CPI) data. Big cryptocurrencies like Bitcoin and Ethereum remained flat at $25,800 and $1,750, respectively. Several altcoins like Internet Computer (ICP), GMX, Sui, and BNP prices jumped. As a result, the total market cap of all cryptocurrencies is still hanging above $1 trillion.
Why the US inflation data matters
The biggest news published on Tuesday was the latest American consumer price index (CPI) data. According to the statistics agency, the headline consumer inflation continued falling, helped by the retreating energy prices.
Consumer inflation dropped from 4.9% in April to 4.0% in May. It has dropped steadily after it peaked at 9.4% in 2022. Core consumer inflation, which excludes the volatile food and energy prices, also dropped to 5.3% in May. This is an implication that inflation is approaching the Fed’s target of 2.0%.
The inflation numbers are important because the Fed is starting its two-day meeting on Tuesday. Therefore, the committee will be inclined to pause its interest rate hikes. As a reminder, the bank has already hiked interest rates from about zero to over 5%.
A pause could come ahead of a pivot, where the Fed starts talking about a pivot. If this happens, we will see many cryptocurrency price rally. Indeed, the Nasdaq 100 and S&P 500 indices have moved into a bull market and are sitting at their highest levels in months. As I wrote on Monday, the fear and greed index has continued rising.
Therefore, Internet Computer, GMX, Sui, Filecoin, Hedera Hashgraph, and BNB are rising because of the rising optimism of the Fed actions.
Could be a dead cat bounce
The ongoing rally of altcoins has several risks ahead. First, there is the growing risks of regulations and delisting. We have seen several companies like eToro and Robinhood delist several altcoins like Solana and Cardano. More delistings could happen as exchanges assess the nature of the tokens and if they are securities.
As you recall, the SEC has already stated that it believes that XRP is a financial security. It has also identified other tokens like securities, which could see American exchanges remove them.
There is also a risk that this rebound is a dead cat bounce, which happens when an asset makes a temporary jump. We saw a major dead cat bounce happen on Tuesday last week, a day after the SEC decided to launch a lawsuit against Binance.
This means that buyers of ICP, GMX, Sui, Hedera Hashgraph, and Terra Luna Classic should be a bit cautious.
