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As Elon Musk predicts inflation going down in upcoming months, here’s what it means for Bitcoin and crypto markets.
The worst days of inflation could be behind us, believes Tesla chief Elon Musk. The tech billionaire made shared his opinion last week during a call at Tesla’s 2022 Annual Meeting of Stockholders on August 5.
Musk Predicts Inflation Decline
During the meeting, Musk says that the costs of commodities and components at Tesla shall be heading down over the next six months. Elon Musk said:
“We sort of have some insight into where prices are headed over time, and the interesting thing that we’re seeing now is that most of our commodities, most of the things that go into a Tesla – not all, more than half the prices – are trending down in six months from now. This could change, obviously, but the trend is down, which suggests that we are past peak inflation”.
As per the company policy, Tesla always buys raw materials a few months in advance. Musk added that “I think inflation is going to drop rapidly,” at some point in the future.
Although Musk predicts a decline in inflation, investors should wait a bit more at this point from building fresh positions. Ahead this week on August 10, the US will report its inflation numbers for the last month of July. Back in June 2022, the US reported a 9.4% inflation rate, its highest in over four decades.
What Does Second Half of 2022 Mean for Crypto?
Elon Musk’s prediction of abating inflation means positive for the overall economic growth and also for risk assets such as equities and crypto. Lower inflationary pressure would mean that the Fed shall be a little less aggressive with quantitative tightening measures. This will thus, help in providing favorable conditions for risk-on assets including crypto.
Cryptocurrencies are poised for outperformance “if equities have bottomed”. “There are few more powerful forces in markets than when the stock market drops at high velocity as in the first half. Cryptos are part of that ebbing tide.”
Similalrly, the 90-day correlation coefficient of Bitcoin and the S&P 500, has now reached 0.65, the highest reading since 2010.