Investors are expecting the Federal Reserve to cut interest rates later this year.
Cryptocurrency markets rose on Thursday after data showed that U.S. inflation fell to its lowest level in more than three years in June.
The Labor Department said the consumer price index (CPI), which measures the cost of goods and services, fell 0.1% in June, dropping the annual rate to 3%, the lowest since April 2021. Excluding food and energy prices, the core CPI rose 0.1% from the previous month and 3.3% from a year ago.
The data fell short of expectations, with Dow Jones analysts previously forecasting a 0.2% monthly increase and a 3.4% annual gain, according to the Bureau of Labor Statistics.
Falling inflation gives the Federal Reserve more room to cut interest rates later this year.
The data came after Federal Reserve Chairman Jerome Powell hinted at a possible interest rate cut in congressional testimony on Tuesday. Powell warned that persistently high interest rates could hurt the U.S. economy and noted that a cooling labor market indicates inflationary pressures are easing.
Cryptocurrency market reaction
Bitcoin (BTC) responded with a 2% price increase over the past 24 hours, trading above $59,000, while Ethereum (ETH) rose 3% to test $3,200.
The rally extended the digital asset's recovery after a heavy sell-off over the weekend.
After hitting a high of $63,800 on July 1, BTC fell 16.5% to a low of $53,500 on July 5. On-chain analytics platform Glassnode described the decline as Bitcoin's “most severe correction since late 2022.”
“Between May and July, the market experienced its most severe cyclical correction, dropping more than 26% from its all-time high,” Glassnode said in a July 7 report.
Among the top 100 cryptocurrencies by market cap, Stacks (STX) led the way with a 12% one-day gain. ZkSync (ZK) and Aave (AAVE) also performed well, rising 6.5% and 6.1%, respectively. Polkadot (DOT) and Solana (SOL) both rebounded 0.5%.
According to data from CoinGlass, 34,000 crypto traders were liquidated in the past 24 hours, totaling $96 million, with long positions accounting for 57% of margin calls despite the bullish market momentum.
In the stock market, futures tracking the S&P 500, Nasdaq 100 and Dow Jones Industrial Average all rose 0.3%.
Related: Is this the end of the cryptocurrency bull market? History says not
