The crypto market has been reeling recently due to the rally with Bitcoin and Ethereum leading the charge. As a result, the total market capitalization increased by 14% since the beginning of the year.
With stock very related with digital currencies, worsening macroeconomic conditions will undermine broader financial markets. But with the World Bank predict if the global economy can enter a recession, the recovery of the crypto market may not happen this year.
As macro trends worsen, the cash essential to a market recovery will flow out as investors flock to safe-haven assets.
World Bank Assessment Of The Situation
According to World Bank, the situation is generally gloomy. Global lenders expect world gross domestic product to grow 1.7% annually, the slowest since the last two recessions.
Core inflation across countries is also hurting the global economy. According to the latest World Bank post a blog, the average inflation for emerging and developing economies is at 48% and 32% for advanced economies. Although this may seem high, it is actually lower compared to previous calculations.
If the global economy slips into recession, we can expect tighter fiscal policies for local governments. With the Consumer Price Data released this week, we can see what the US Federal Reserve is up to.
Outlook For The Broader Crypto Market
Major cryptocurrencies like Bitcoin and Ethereum have high correlations with major indices like the S&P 500 and Nasdaq. This will be dangerous for crypto because this means that wherever the stock is going to be.
And with the market anticipating A better CPI, higher inflation rate could affect the broader financial markets, pulling the digital currency down. Adding to the downward pressure is fear, uncertainty, and doubt available in the market.
At the time of writing, cryptocurrency king Bitcoin has surged past the $18,000 mark, make investors feel that recovery is in hand. However, external market pressures like macroeconomic trends will have an impact on how Bitcoin reacts to small price changes.
Crypto total market cap at $843 billion on the daily chart | Chart: TradingView.com
This rally could be met with resistance if the CPI data comes back higher than previously thought. With the US central bank already hawkish in terms of markets, we may see more pain in crypto and stocks.
This will have different results in safe haven assets like gold and bonds. Crypto and stock investors should pay close attention to the CPI release as it will have a huge impact on their portfolio.
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