#Analysis of the impact of PCE data on the cryptocurrency market
## PCE data overview
According to the latest data released, the core PCE price index was 2.6% annually in May, in line with expectations and down from the previous value of 2.8%. The monthly rate increased by only 0.1%, the smallest increase since November 2023.
The overall PCE data showed:
- Month-on-month growth of 0.0%, in line with expectations
- Year-on-year growth of 2.6%, lower than the previous value of 2.7%
The core PCE data showed:
- Month-on-month growth of 0.1%, in line with expectations
- Year-on-year growth of 2.6%, lower than the previous value of 2.7%
## Market reaction
After the release of PCE data, the futures market jumped.
In the cryptocurrency market, it was reported that Bitcoin continued to consolidate above $61,000 before the release of PCE data. Although there was some liquidation of over-leveraged positions after the release of the data, it was "insignificant".
## Potential impact on monetary policy
The PCE data further reinforced the narrative that the inflation trend is back on track. If this trend continues over the next two months, it could increase the likelihood of a rate cut by the Federal Reserve in September.
Currently, the federal funds rate is 2.7 percentage points above core PCE, the most restrictive monetary policy since September 2007.
## Impact on Cryptocurrencies
While the direct impact of PCE data on cryptocurrencies is unclear, its impact on monetary policy expectations could indirectly affect the cryptocurrency market:
1. Slowing inflation and potential expectations of rate cuts could have a positive impact on risky assets such as Bitcoin. A low interest rate environment typically increases investors' preference for riskier assets.
2. A weaker dollar could support cryptocurrencies. , The rise in the stock market is partly attributed to a weaker dollar, and this trend could also be positive for cryptocurrencies.
3. However, the immediate reaction in the cryptocurrency market seems muted. This could indicate that traders are waiting for clearer signals, or that the cryptocurrency market may be forming its own independent dynamics.
4. In the long run, if inflation continues to slow, it could weaken some of Bitcoin's appeal as a hedge against inflation. But at the same time, a more favorable macroeconomic environment could increase overall demand for risky assets.