Bitcoin Sees Rally Amid Varied US Inflation Figures: Implications for the Market
Bitcoin and various alternative coins are witnessing a significant revival post the release of diverse consumer inflation numbers from the United States.
Recently, Bitcoin (BTC) reached $99,000, marking its highest point since January 7. This surge of 10% from its recent monthly low has also propelled altcoins like Virtuals Protocol (VIRTUAL), ai16z (AI16Z), and Algorand (ALGO) upwards by over 13% each.
This positive trend isn’t limited to digital assets; it has also impacted traditional financial markets. Dow Jones Industrial Average futures soared by 700 points while S&P 500 futures jumped nearly 100 points. Simultaneously, bond yields dipped, with 10-year, 30-year, and 5-year yields settling at 4.66%, 4.90%, and 4.48%, respectively.
The US Bureau of Labor Statistics unveiled a decrease in the core Consumer Price Index (CPI) from 0.3% in November to 0.2% in December. On an annual basis, core inflation also decreased to 3.2% from the previous 3.3%. Despite this positive core data, the overall headline CPI rose from 0.3% to 0.4% in December, leading to a yearly uptick of 2.9%.
Eminent economist Mohamed A. El-Erian shared his insights on the reported figures, stating, “The monthly core measure is softer than expected… Core CPI rose 0.2% in December, below the 0.3% consensus forecast, and bringing the annual measure to 3.3%; and headline rose 0.4%.”
The market’s response to the more favorable core inflation figures has been clear. Core inflation, excluding volatile food and energy prices, is a crucial gauge for the Federal Reserve. The dip in core CPI has raised speculation that the Fed might implement more than two interest rate cuts in the approaching year.
Although the inflation report prompted optimism, underlying risks prevail. Inflation remains above the Fed’s 2% target, and various factors like the ongoing fires in Los Angeles could fuel elevated costs in sectors such as insurance and renting. Additionally, certain policies proposed by former President Donald Trump, like mass deportations and tariffs, might exert upward pressure on inflation this year.
Bitcoin Price Evaluation
Recent price patterns suggest a consistent recovery for Bitcoin, commencing with the formation of a long-legged doji candlestick pattern—a common signal for a bullish reversal—on Monday. Bitcoin has effectively breached the 23.6% Fibonacci Retracement level at $94,210 and the 100-day Exponential Moving Average, along with a critical support level at $91,535 set since November.
Looking ahead, Bitcoin may sustain its upward momentum in the coming days, especially with investor focus on Trump’s upcoming inauguration. If the bullish trend endures, there’s a chance for the cryptocurrency to revisit its all-time high of $108,000. Nonetheless, a fall below this week’s low of $89,000 could compromise the existing bullish sentiment.
Final Thoughts
Summing up, Bitcoin’s recent surge, buoyed by optimistic core inflation data, showcases notable market responses that extend beyond the realm of cryptocurrencies. Investors are cautiously hopeful, weighing the prospect of further gains against persistent inflationary pressures. The approaching weeks will be pivotal as market participants monitor economic indicators and political developments that could reshape the landscape for both cryptocurrencies and traditional assets.
