The U.S. Institute for Supply Management ISM non-manufacturing purchasing managers index PMI beat expectations and hit a four-month high in August, and U.S. service sector activity gained momentum in August, suggesting to investors that Fed officials may continue to surge on September 21 75 basis points of rate hike. In addition, most central banks around the world are expected to follow the Fed to raise interest rates sharply. Fundamental indicators and market expectations led to another decline in the crypto market.
The Purchasing Managers Index is an index aggregated through monthly surveys of purchasing managers, which can reflect the changing trend of the economy. Covering the fields of production and circulation, manufacturing and non-manufacturing, it is divided into manufacturing PMI, service PMI, and some countries have established construction PMI. The Institute for Supply Management reported that the non-manufacturing purchasing managers’ index rose to 56.9 last month from 56.7 in July, the second straight monthly increase after three months of declines. Immediately following the results, the CME FedWatch tool reflected a new high in the likelihood (74% chance) of another 0.75% rate hike by the Fed.
Analysts pointed to some key data on the U.S. economy that showed no signs of a recession. That helped push U.S. bond yields higher in part and gave the dollar more boost. In addition, the central bank is only likely to moderate the pace of tightening until third-quarter inflation data released at the end of October show that price pressures have eased.
Another important piece of data is the consumer price index for August to be released on September 13. CPI is expected to be high due to lower gasoline prices. At the same time, Federal Reserve Chairman Jerome Powell recently emphasized that the Fed is committed to fighting inflation with higher interest rates and does not intend to back down. Given concerns about inflation and rising interest rates, which investors would assume would make the Fed more aggressive in raising rates, the overall crypto market sentiment is not so high.
Not only the Federal Reserve, but also the European Central Bank’s governing member Nott said that neutral interest rates may not be enough to solve the problem of high inflation, and the market’s pricing of interest rate hikes in September is not unwise.
In terms of market conditions, as of 11:00 a.m. on September 7, BTC fell below $19,000, and ETH fell below $1,500.
On the investment front, global investment in cryptocurrency companies fell from a record $32.1 billion last year to $14.2 billion in the first half of 2022, according to a new report from global auditing and consulting firm KPMG, and this slowdown will continue until the end of 2022. KPMG also expects investors to shift from companies offering tokens and NFTs to blockchain infrastructure projects in the second half of the year, especially the use of blockchain in the modernization of financial technology. Analysts see growing interest in solutions related to compliance and transaction traceability, as well as increased corporate interest in stablecoins, as a low-risk route to investing in cryptocurrencies.
Despite slowing market conditions and investment enthusiasm, the crypto and blockchain industries continue to show signs of maturation. Payment giant Visa noted that cryptocurrencies have gained attention from consumers, investors, developers, and even policymakers. Although the role of cryptocurrencies in the future remains to be seen, it is certain that cryptocurrencies will be used in more scenarios in the future.
In addition, Visa’s global survey shows that more than half of adults who are concerned about cryptocurrency want banks to provide cryptocurrency products; among respondents who already own cryptocurrency, nearly 40% are likely to switch major banks to those that offer cryptocurrency products. bank. Financial institutions also need to develop cryptocurrency strategies as soon as possible to help consumers enter the cryptocurrency ecosystem smoothly and securely.