Important points
- Bitcoin rose 2% in 24 hours to near $100,000 after better-than-expected CPI data for December.
- A decline in the dollar index and expectations for a June interest rate cut have sparked optimism across crypto and traditional markets.
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Bitcoin has risen more than 2% in the past 24 hours and is nearing the $100,000 mark as better-than-expected Consumer Price Index (CPI) data boosts optimism in financial markets.
The largest crypto asset by market capitalization rose $2,000 after the data was released, reaching an intraday high of $99,400. Bitcoin is currently trading at $99,000 and is consolidating its position as the rally continues.
Analysts expected the CPI to rise 0.4% in December, slightly higher than the 0.3% rise in November.
On a year-on-year basis, CPI was 2.9%, in line with expectations but up from 2.7%.
Core CPI, which excludes volatile food and energy prices, rose 0.2% month-on-month, in line with expectations, but down from 0.3% in November. Compared to the same month last year, core CPI fell to 3.2%, slightly below expectations and last month's 3.3%.
The pace of core inflation, which policymakers are closely monitoring, remains above 3%, frustrating officials even as the decline in headline inflation accelerates. However, the data strengthens market sentiment as traders expect monetary policy easing soon.
The dollar index (DXY), which is often inversely correlated with Bitcoin, fell 0.5% to 108.5 after the CPI was released. This represents a significant reversal from Monday's high of 110, which was triggered by strong labor market data.
The weaker dollar pushed both traditional and crypto markets higher, with the S&P 500 and Nasdaq rising 1.4% and 1.7%, respectively.
In the crypto space, Bitcoin soared after weeks of range-based trading, driven by macroeconomic data and expectations for monetary policy.
Assets have been stuck below $100,000 since Federal Reserve Chairman Jerome Powell's hawkish comments in December. Strong economic and inflation data initially dampened hopes for rate cuts this year, but today's CPI report reignited optimism.
The probability of a rate cut at the June 18 meeting is now 44.5%, up from 39% in September, according to the CME FedWatch tool. However, the chance of cuts being made at subsequent meetings remains less than 30%.
December producer price index (PPI) data released on Tuesday also showed lower-than-expected inflation, confirming Bitcoin's rebound from a sudden drop below $90,000 earlier in the week.
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