Summary:
Bitcoin's price surged to $98,500 after CPI data was released.
Core CPI unexpectedly declined to 3.2%, influencing market sentiment.
Traditional markets reacted positively with a 0.5% increase in stock index futures.
Bitcoin has been trading below $100,000 since December due to hawkish comments from the Fed.
Recent PPI data showed cooler inflation, aiding Bitcoin's recovery.
Unexpected Decline in Core CPI Sends Bitcoin Price Higher
Bitcoin (BTC) has been consolidating in a range 10%-15% below record highs as investors tempered expectations for further interest rate cuts. However, recent data has sparked renewed interest.
While headline inflation rose faster than anticipated in December, an unexpected decline in the year-over-year core rate has led investors to buy. The Consumer Price Index (CPI) increased by 0.4% in December, slightly above analyst consensus and up from 0.3% in the previous month. On a year-over-year basis, CPI was up 2.9%, aligning with forecasts but higher than November's 2.7%.
The Core CPI, which excludes volatile food and energy prices, rose by 0.2%, meeting expectations but down from 0.3% the previous month. Year-over-year, core CPI dipped to 3.2%, slightly below forecasts of 3.3% and November's 3.3%.
This core inflation rate is crucial for policymakers, who have expressed frustration over its persistence above 3%, even as headline inflation decreased more rapidly.
Following the CPI report, Bitcoin's price surged by approximately $1,500, reaching $98,500, marking a 2% increase over the past 24 hours. In traditional markets, U.S. stock index futures rose by 0.5%, while bond yields and the dollar fell sharply.
Throughout January, crypto markets have traded within a range, influenced by macroeconomic data and shifting monetary policy expectations amidst a strong economy and concerns of persistent inflation. Bitcoin has largely remained below $100,000 since Federal Reserve Chair Jerome Powell's hawkish comments in December, which, alongside stronger-than-expected economic data, led to diminished expectations for rate cuts this year.
Most recently, the Producer Price Index (PPI) for December showed cooler-than-expected inflation readings, supporting Bitcoin's rebound to $97,000 after an abrupt sell-off below $90,000 earlier in the week.
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