Crypto Analyzer

Bitcoin Rises on Moderate Inflation Data; Market Reacts to CPI Numbers

Bitcoin experienced a surge in price following the release of May’s Consumer Price Index (CPI) data, which indicated a moderate level of inflation at 3.3% year-over-year, slightly lower than the previous month’s 3.4% rate. This news was welcomed by the crypto market, as the prospect of potential interest rate cuts by the Federal Reserve in the near future gained traction.

Within an hour of the CPI data announcement, Bitcoin saw a 2.3% increase in value, with other top cryptocurrencies also showing positive movements. Ethereum, for example, rose by 2.6% during the same period, according to data from CoinGecko. Notably, NEAR Protocol’s NEAR token recorded the highest increase at 5.4%, despite a recent decline of 13.4% over the past week.

The Labor Department, as reported by Barron’s, revealed that the monthly inflation rate in May slowed to 0.1% from the 0.3% seen in April. Core CPI, which excludes volatile energy and food prices, also decelerated to an annual rate of 3.5%, the lowest level since April 2021.

Ruslan Lienkha, chief of markets at YouHodler, expressed optimism in the current market sentiment, stating, “The cryptocurrency can overcome the resistance level in the zone of 71k-73k and renew all-time highs in the following weeks, driven by optimism in financial markets.” He attributed this positivity to expectations of upcoming interest rate cuts in the US and Europe, which are stimulating capital inflows into risk assets.

While there is a growing risk appetite among investors, as evidenced by heightened trading activity in meme and penny stocks, Lienkha highlighted that crypto investors are also shifting towards meme coins, increasing the market’s risk profile.

Market analysts have been closely monitoring the shelter component of the CPI, particularly housing costs, which have been a persistent source of inflationary pressure. Many anticipate a gradual easing in housing and rent inflation, which would help align overall inflation figures closer to the Federal Reserve’s 2% target.

Despite the encouraging CPI data, it is anticipated that Federal Reserve Chair Jerome Powell will adopt a cautious approach towards potential rate cuts in the upcoming Federal Open Market Committee (FOMC) meeting. The Fed is likely to underscore the strength of the US economy and the presence of sustained high inflation as reasons to retain higher interest rates for an extended period.

As investors continue to dissect the implications of the recent inflation data and await further insights from the Federal Reserve, Bitcoin and the broader crypto market remain responsive to macroeconomic developments. The market sentiment, cautiously optimistic amid potential unforeseen negative events, is expected to influence the short-term trajectory of digital assets.

Source: This article is based on data collected from various sources and written for information purposes only. For investment advice, readers are advised to consult with a licensed financial professional.