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Inflation remains the primary economic concern for 2023, significantly affecting both Ether and Bitcoin.
According to a Reuters survey, most major economies are projected to avoid an outright recession or get away with a shallow one as the global economy performs better than anticipated. Median forecasts for the majority of the 45 economies surveyed were upgraded from the January poll. The survey estimated global growth at 2.5% for the year, up from 2.1% expected three months ago but below the International Monetary Fund's 2.8% view.
Moreover, economists have upgraded their inflation outlook, with median forecasts raised for over two-thirds of the 45 economies polled. Over three-quarters of economists who answered an additional question stated that the bigger risk to their 2023 inflation view was for it to be higher than they expected.
"The big macro question of the day is how much economic weakness will be needed to bring inflation under control. Our point is that there has been only limited progress in bringing global inflation down with almost no real pain," said Ethan Harris, head of global economics research at Bank of America Securities.
Furthermore, the Federal Reserve is expected to deliver a final 25-basis-point rate increase in May and then remain steady for the remainder of 2023. The European Central Bank is also expected to increase its deposit rate by a similar amount next week and again in June, while the Bank of England is projected to raise interest rates in May.
James Rossiter, head of global macro strategy at TD Securities, stated that "as crisis fears ebb, inflation worries are again returning. Inflation risks tilt to the upside as the long-expected slowdown in core inflation has largely failed to materialize."
At the time of writing, the unemployment rate in the United States is projected to spike from 3.5% to 4.3% by the end of 2023 and average 4.5% in 2024. Growth is also anticipated to average 1.1% and 0.8% this year and in 2024, respectively. Meanwhile, economic growth in China is predicted to rise to 5.4% this year from 3.0% last year.
The report comes as several cryptocurrencies' purchasing power has declined due to the increase in supply. On August 19, both Bitcoin and Ether dropped as investors feared surging interest rates and persistent inflation.
According to a report published by CNBC, in April, Bitcoin "slid toward $29,000 as traders mulled over the likelihood that Federal Reserve rate cuts may be further away than they thought. The price of bitcoin was last lower by 3.22% and trading at $29,227.24, while ether fell 4.82% to $1,980.68, according to Coin Metrics."
The sudden drop came a week after ether rallied by 12 percent and pushed beyond $2,000 since August.
"We believe the pullback we're seeing is more a function of an overdue correction following some impressive moves and possible profit taking on broader risk-off flow in global markets than anything crypto-specific," said Joel Kruger, market strategist at LMAX Group.
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