The crypto market is up today and Bitcoin (BTC), Ether (ETH), Solana (SOL) and numerous altcoins rallied after data published by the Institute for Supply Management (ISM) on Jan. 4 which showed slower demand and lower input prices for manufactures which gave investors positive expectations that the Federal Reserve may reduce future interest rate hikes and a cooling US Dollar.
Despite the strength of today’s rally, its longevity remains under question as investors anticipate the Federal Reserve’s meeting minutes on Jan. 4 to hint at the size of future interest rate hikes.
Crypto and equities markets responded positively ahead of the Jan. 6 nonfarm payrolls report and the cooling supply chain figures shown below could form the basis for softer rate hikes going forward.
Manufacturing overview. Source: ISM
Depending on clues provided in the FED meeting minutes, markets could see further upside, or a total retrace of today’s intraday gains could occur.
Generally, the crypto market is still significantly down from its all-time highs, but Ether’s price reacted positively by rallying to a 3-week high at $1,253 on Jan. 4. Despite the gains, many traders are still nervous over the Grayscale Ether trust potentially converting to a Reg M which would allow spot price withdrawals and its possible impact on the market.
With Bitcoin’s record low volatility, some analysts believe that price whipsaws are on the verge of returning but in the meantime, the BTC’s range bound price action could be providing a boost for altcoins.
Let’s examine three of the major factors influencing crypto market strength on the day.
Cooling demand amid a robust job market puts the FOMC center stage
High inflation was a major problem in 2022 and the recent ISM data may give the Fed multiple reasons to taper interest rate increases. If inflation were to level off, which is something the ISM data may suggest, Powell suggested smaller hikes in subsequent months would happen if inflation were to decrease.
In his FOMC press conference on Dec. 14, Powell noted the importance of the supply chain on inflation:
“You can break inflation down…..
