Important takeaways
- Bitcoin edges closer to $100,000, gains 2% in 24 hours after better-than-expected December CPI data.
- Falling dollar index and expectations of cuts for June are driving optimism across crypto and traditional markets.
Bitcoin is approaching the $100,000 mark and is up over 2% in the last 24 hours on better-than-expected consumer price index (CPI) data fueled optimism in financial markets.
The largest crypto asset by market capitalization climbed $2,000 after the data release to hit an intraday high of $99,400. Bitcoin is currently trading at $99,000, consolidating its position as the rally continues.
December’s CPI rose 0.4%, slightly above analysts’ expectations and November’s rise of 0.3%.
On an annual basis, the CPI came in at 2.9%, which is in line with forecasts but marks an increase from the previous 2.7%.
Core CPI, which excludes volatile food and energy prices, rose 0.2% month-on-month, in line with forecasts and down from November’s 0.3%. On a year-over-year basis, the core CPI fell to 3.2%, slightly below forecasts and the previous month’s pace of 3.3%.
The core rate of inflation, closely watched by policymakers, remains above 3%, frustrating officials despite the faster decline in headline inflation. However, the data has boosted market sentiment, as traders now expect earlier monetary policy easing.
The dollar index (DXY), often inversely correlated with Bitcoin, fell 0.5% to 108.5 after the CPI release. This marks a significant retreat from Monday’s high of 110, triggered by strong labor market data.
The weaker dollar sent both traditional and crypto markets higher, with the S&P 500 and Nasdaq opening up 1.4% and 1.7%, respectively.
In the crypto space, Bitcoin’s rise follows weeks of range-bound trading driven by macroeconomic data and monetary policy expectations.
The asset had consolidated below $100,000 since Federal Reserve Chairman Jerome Powell’s hawkish comments in December. Strong economic and inflation data initially erased expectations of interest rate cuts this year, but today’s CPI report reignited optimism.
CME FedWatch Tool now shows a 44.5% probability of a rate cut at the June 18 meeting, up from 39% in September. However, the probability of subsequent cuts is still below 30% for later encounters.
Tuesday’s producer price index (PPI) data for December also showed cooler-than-expected inflation readings, supporting Bitcoin’s recovery from an abrupt drop below $90,000 earlier this week.