Cryptocurrencies XRP, MKR Shine as BTC, ETH Hold Steady Ahead of US Inflation Data

Payments-focused cryptocurrency XRP and MKR, the governance token of the peer-to-peer lending platform Maker, are rallying in an otherwise moribund crypto market awaiting the release of the Federal Reserve's preferred measure of U.S. inflation: core personal consumption expenditure (PCE).

XRP traded recently at around 50 cents, representing an 11% gain over 24 hours, and MKR changed hands at $775, up 7%, according to CoinDesk data. Market leaders bitcoin (BTC) and ether (ETH) traded little changed near $19,500 and $1,340, respectively.

XRP has been a "court case play" this month, outperforming the broader market in hopes that the long-drawn-out legal tussle between Ripple Labs, a San Francisco-based company with close ties with the cryptocurrency, and the U.S. Securities and Exchange Commission, will be resolved soon.

On Sept. 29, a U.S. District Court Judge ordered the release of documents about a 2018 speech by the then-Director of the SEC's division of corporation finance, William Hinman, bringing cheer to the XRP community.

In that speech, Himnan said ether, the second-largest cryptocurrency, was not a security – a comment Ripple Labs seeks to use as a defense against the SEC's charge that Ripple violated securities law by raising $1.3 billion through XRP sales to investors between 2013 to 2020. Ripple plans to argue that if the regulator didn't consider ether as a security back then, how can it subject XRP to securities law? The SEC filed the suit against Ripple in December 2020.

XRP moved above a multimonth bear-market trendline early this month and was trading above its 200-day moving average at press time.

MKR's move to a three-week high comes a day after Tyler Winklevoss, co-founder of crypto exchange Gemini and a longtime crypto investor, submitted a proposal on the Maker forum to boost the adoption of the GUSD$0.9981 stablecoin in the latter’s ecosystem.

Winklevoss proposed a three-month marketing incentive plan, under which Gemini would pay a fixed annual interest of 1.25% on the total GUSD balance in MakerDAO's vault.

Focus on core PCE

The Core PCE released by the U.S. Bureau of Economic Analysis gauges the average amount of money consumers spend on goods and services each month. It excludes volatile components like food and energy, and is considered to provide a better understanding of the underlying demand-pull inflation than other figures, like the consumer price index.

The Core PCE for August, scheduled for release at 12:30 UTC, is likely to show a 0.5% month-on-month rise, taking the year-on-year rate up to 4.7% from July's 4.6%, according to Reuters estimates sourced from FXStreet.

A higher-than-expected reading would imply stickier price pressures and a more challenging inflation fight for the Fed, weakening the case for a meaningful bounce in the battered risk assets, including cryptocurrencies.

"Remember that, according to the Fed's quarterly economic projections, the central bank expects this inflation measure to drop to 4.5% by the end of this year. Even that drop to 4.5% will require Fed Funds being taken into the 4.25-4.50% range, according to the Fed," ING's global head of markets Chris Turner, wrote in a note to clients. The Fed's target range is currently 3%-3.25%.

"Therefore, any upside surprises in this data suggest the Fed may have to hike even harder," Turner added.