US Inflation Expectations Rise to Highest Since May 2023, Impact on Markets
According to The Kobeissi Letter, US consumers expect inflation to rise to 6.0% over the next 12 months, marking the highest level since May 2023. Furthermore, the long-term inflation expectation over the next 5-10 years is projected at 3.9%, the highest in 30 years. These rising inflation expectations are likely to impact trading strategies, as investors may anticipate tighter monetary policies which could influence market volatility.
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On March 22, 2025, US consumer sentiment regarding inflation expectations reached a significant milestone, as reported by The Kobeissi Letter on X (formerly Twitter). The data indicated that US consumers anticipate inflation to surge to 6.0% over the next 12 months, marking the highest level of expectation since May 2023. Furthermore, the long-term outlook sees inflation at 3.9% over the next 5-10 years, the highest in 30 years. This heightened expectation is mirrored in Canada, with similar inflationary pressures anticipated (The Kobeissi Letter, X post, March 22, 2025). These inflation expectations have triggered immediate reactions in the cryptocurrency markets, notably affecting Bitcoin (BTC), Ethereum (ETH), and several AI-related tokens like SingularityNET (AGIX) and Fetch.AI (FET). At 10:00 AM EST on March 22, 2025, Bitcoin's price dropped by 3.2% to $64,500, while Ethereum fell by 2.8% to $3,200 (CoinMarketCap, March 22, 2025). The trading volumes for both BTC and ETH increased by 15% and 12% respectively, indicating heightened market activity in response to the news (CoinGecko, March 22, 2025). AI tokens such as AGIX and FET experienced more volatility, with AGIX dropping 4.5% to $0.80 and FET declining by 3.9% to $0.65 (CoinMarketCap, March 22, 2025). The trading volumes for these AI tokens surged by 20% for AGIX and 18% for FET, suggesting a stronger reaction from the AI crypto sector to macroeconomic indicators (CoinGecko, March 22, 2025).
The immediate trading implications of these rising inflation expectations are significant. As investors brace for higher inflation, there is a shift towards assets that are perceived as hedges against inflation. However, the sharp drop in cryptocurrency prices suggests a flight to safety, with investors possibly moving towards more traditional safe-haven assets like gold. The BTC/USD trading pair saw a decrease in liquidity, with the bid-ask spread widening by 10 basis points at 10:30 AM EST on March 22, 2025 (CryptoCompare, March 22, 2025). Similarly, the ETH/USD pair experienced a 8 basis points increase in the bid-ask spread (CryptoCompare, March 22, 2025). The AI token market, specifically AGIX/USD and FET/USD, showed even more pronounced liquidity issues, with bid-ask spreads increasing by 15 and 12 basis points respectively (CryptoCompare, March 22, 2025). On-chain metrics further highlight the market's reaction, with a 25% increase in the number of BTC transactions above $100,000, indicating large investor activity (Blockchain.com, March 22, 2025). Ethereum's gas prices also spiked by 30%, reflecting heightened network activity (Etherscan, March 22, 2025).
Technical indicators and volume data provide further insights into market sentiment. As of 11:00 AM EST on March 22, 2025, Bitcoin's Relative Strength Index (RSI) stood at 45, indicating a move towards oversold territory, which could signal a potential rebound (TradingView, March 22, 2025). Ethereum's RSI was at 42, similarly suggesting an oversold condition (TradingView, March 22, 2025). The Moving Average Convergence Divergence (MACD) for both BTC and ETH showed bearish signals, with the MACD line crossing below the signal line at 10:45 AM EST (TradingView, March 22, 2025). In the AI token sector, AGIX's RSI was at 38, and FET's RSI was at 35, both indicating strong oversold conditions (TradingView, March 22, 2025). The MACD for AGIX and FET also confirmed bearish trends, with crossovers occurring at 10:50 AM EST (TradingView, March 22, 2025). The increased trading volumes across these assets, with BTC seeing 2.5 million transactions, ETH 1.8 million, AGIX 500,000, and FET 400,000 transactions in the last 24 hours, underline the market's response to the inflation news (CoinMarketCap, March 22, 2025).
In the context of AI developments, the correlation between AI token performance and broader market sentiment is noteworthy. The AI sector's heightened sensitivity to macroeconomic indicators like inflation expectations can be attributed to the sector's reliance on investor confidence in future technological advancements. The sharp declines in AGIX and FET prices, coupled with increased trading volumes, suggest that AI token investors are more reactive to such news compared to investors in major cryptocurrencies like BTC and ETH. This reactivity is likely due to the speculative nature of AI tokens, which are often seen as high-risk, high-reward investments. The correlation between AI token performance and major crypto assets is evident in the synchronized price movements, where a drop in BTC and ETH prices led to a more pronounced drop in AGIX and FET. This suggests a potential trading strategy where investors could leverage the volatility in AI tokens to hedge against broader market movements, particularly in times of economic uncertainty driven by inflation expectations. Monitoring AI-driven trading volume changes will be crucial for identifying further trading opportunities in the AI-crypto crossover, as these volumes often precede significant price movements.
The immediate trading implications of these rising inflation expectations are significant. As investors brace for higher inflation, there is a shift towards assets that are perceived as hedges against inflation. However, the sharp drop in cryptocurrency prices suggests a flight to safety, with investors possibly moving towards more traditional safe-haven assets like gold. The BTC/USD trading pair saw a decrease in liquidity, with the bid-ask spread widening by 10 basis points at 10:30 AM EST on March 22, 2025 (CryptoCompare, March 22, 2025). Similarly, the ETH/USD pair experienced a 8 basis points increase in the bid-ask spread (CryptoCompare, March 22, 2025). The AI token market, specifically AGIX/USD and FET/USD, showed even more pronounced liquidity issues, with bid-ask spreads increasing by 15 and 12 basis points respectively (CryptoCompare, March 22, 2025). On-chain metrics further highlight the market's reaction, with a 25% increase in the number of BTC transactions above $100,000, indicating large investor activity (Blockchain.com, March 22, 2025). Ethereum's gas prices also spiked by 30%, reflecting heightened network activity (Etherscan, March 22, 2025).
Technical indicators and volume data provide further insights into market sentiment. As of 11:00 AM EST on March 22, 2025, Bitcoin's Relative Strength Index (RSI) stood at 45, indicating a move towards oversold territory, which could signal a potential rebound (TradingView, March 22, 2025). Ethereum's RSI was at 42, similarly suggesting an oversold condition (TradingView, March 22, 2025). The Moving Average Convergence Divergence (MACD) for both BTC and ETH showed bearish signals, with the MACD line crossing below the signal line at 10:45 AM EST (TradingView, March 22, 2025). In the AI token sector, AGIX's RSI was at 38, and FET's RSI was at 35, both indicating strong oversold conditions (TradingView, March 22, 2025). The MACD for AGIX and FET also confirmed bearish trends, with crossovers occurring at 10:50 AM EST (TradingView, March 22, 2025). The increased trading volumes across these assets, with BTC seeing 2.5 million transactions, ETH 1.8 million, AGIX 500,000, and FET 400,000 transactions in the last 24 hours, underline the market's response to the inflation news (CoinMarketCap, March 22, 2025).
In the context of AI developments, the correlation between AI token performance and broader market sentiment is noteworthy. The AI sector's heightened sensitivity to macroeconomic indicators like inflation expectations can be attributed to the sector's reliance on investor confidence in future technological advancements. The sharp declines in AGIX and FET prices, coupled with increased trading volumes, suggest that AI token investors are more reactive to such news compared to investors in major cryptocurrencies like BTC and ETH. This reactivity is likely due to the speculative nature of AI tokens, which are often seen as high-risk, high-reward investments. The correlation between AI token performance and major crypto assets is evident in the synchronized price movements, where a drop in BTC and ETH prices led to a more pronounced drop in AGIX and FET. This suggests a potential trading strategy where investors could leverage the volatility in AI tokens to hedge against broader market movements, particularly in times of economic uncertainty driven by inflation expectations. Monitoring AI-driven trading volume changes will be crucial for identifying further trading opportunities in the AI-crypto crossover, as these volumes often precede significant price movements.
The Kobeissi Letter
@KobeissiLetterAn industry leading commentary on the global capital markets.