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Is the ‘crypto winter’ melting into spring? – Financial Times

Is the crypto winter thawing into spring?

The beleaguered cryptocurrency industry is still reeling from the humbling market crash earlier this year. The price of many widely traded tokens tumbled, while popular narratives around the benefits of digital coins as a hedge against inflation or a store of value were surrendered.

At the same time, some once-prominent firms in the sector — including crypto lending platform Celsius and hedge fund Three Arrows — collapsed in the wake of unrelenting market pressure.

However, in recent weeks, prices have plateaued.

The world’s flagship cryptocurrency bitcoin has broadly oscillated around the $20,000 to $25,000 mark, after dropping from a peak of just under $69,000 in November. The Merge — the name given to ethereum’s shift to a greener, less energy intensive blockchain system — has so far failed to propel the respective coin to previous highs of almost $5,000.

Overall, crypto futures volumes have also failed to pick up momentum. Data shared with the Financial Times from analytics platform Crypto Compare show that overall futures volumes have remained stagnant over the past three months.

Still, the relative stability of the industry’s most popular tokens in recent weeks has fuelled debate among speculators about when the so-called “crypto winter” can be deemed to have melted into spring. Scott Chipolina

Did US consumer prices cool in September?

US inflation is expected to have climbed at a slightly slower pace in September than the previous month, helped by a slide in energy prices.

Economists polled by Reuters expect the headline US consumer price index to register a reading of 8.1 per cent in September year on year, compared with 8.3 per cent in August. CPI is expected to have risen 0.2 per cent on a month on month basis, compared with 0.1 per cent in August.

The drag on headline CPI is likely to be attributable in part to a drop in energy costs, said Barclays analyst Jonathan Hill, who expects the data to show a roughly 6 per cent decrease in petrol prices.

But forecasts show that core CPI — which strips out the effects of the volatile food and energy sectors — could be bolstered by the continued rise in shelter costs.

CPI is expected to have hit 6.5 per cent year on year in September, and 0.5 per cent month on month, from 6.3 per cent and 0.6 per cent, respectively, in August. US housing prices have fallen in recent months as higher interest rates have driven mortgage rates up. That in turn has bolstered the rental market, where Barclays expects the inflation data to show an increase in rents of 0.6 per cent month-over-month.

The CPI data are due a day after the publication of the minutes from the Federal Reserve’s September meeting. Both the data and the minutes are likely to inform market expectations for the Fed’s November meeting.

Futures markets are currently pricing in expectations for a fourth consecutive 0.75 percentage point interest rate rise next month. The tone of the minutes and the state of inflation could cement that view. Kate Duguid

Did UK GDP decline in August?

The UK economy is expected to have contracted slightly in August, after stagnating for most of this year, as a result of soaring prices hitting household demand and business activity.

Economists polled by Reuters expect data on Wednesday to show that GDP fell 0.1 per cent between July and August, after flatlining in the three months to July.

The data are also expected to show that industrial production shrank by 0.2 per cent month on month, while output in the services sector rose 0.1 per cent.

In the three months to August, the economy is forecast to be 0.2 per cent smaller than in the previous three months.

The UK’s economic outlook has not brightened, economists say, despite the government’s plans to help with rising energy costs and proposed tax cuts.

The government has frozen households’ energy bills and slashed taxes to boost growth. However, some economists expect a deep recession in the UK economy as the “mini” Budget resulted in surging interest rate expectations, adding a borrowing costs crisis to a cost of living crisis.

Sanjay Raja, economist at Deutsche Bank, said that the UK economic outlook “has weakened further” after the policy announcement on September 23. He expects household spending and business investment to be weaker than before the government announced its tax cuts with unemployment expected to rise from next year.

Despite fiscal measures that should support real disposable incomes, “tighter financial conditions will offset much of the gains in fiscal policy,” said Raja.

He now expects the UK economy to recover to pre-pandemic levels only in 2024. This is in sharp contrast with all other G7 countries that have already regained the ground lost during the health crisis.

Read More: Is the ‘crypto winter’ melting into spring? – Financial Times

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