Cryptocurrency and stock market investors are holding their breath, waiting for the January consumer price index (CPI) inflation data to be announced by the US Bureau of Labor Statistics. This key data point provides important insight into the Fed’s monetary policy stance. It also potentially paves the way for rate cuts later this year. Bitcoin, the backbone of the crypto market, has already responded positively to the latest developments. Spot Bitcoin ETFs have seen significant buying. It also triggered a significant rally that pushed the price above the $50,000 level. Here are the details about US inflation data and predictions for crypto currencies…
US inflation data expectation fuels Bitcoin
At 16.30 Türkiye time, an important data will be revealed: US inflation data. Wall Street giants are further fueling optimism by expecting a significant decline in both headline and core CPI inflation. Forecasts show that headline inflation will fall to 2.9%, the lowest value since March 2021, and core inflation will fall to 3.7%, the lowest value since April 2021. These figures will mean a major change in inflation trends. It would also provide the Fed with the necessary justification to consider rate cuts in the coming months.
The CME FedWatch Tool currently puts the probability of a 25 basis point rate cut in May at almost 50%. It is also gaining strength with a high probability for June. This prospect excites bullish investors, as low interest rates typically mean increased risk appetite and capital flowing into alternative assets such as Bitcoin.
What do technical indicators indicate?
Technical indicators also paint a rosy picture for Bitcoin. The US dollar index (DXY) is moving away from the 104.25 level. A drop below 104 is seen as a major catalyst to push Bitcoin towards $55,000. Additionally, the 10-year treasury yield (US10Y) remains above 4%. Meanwhile, the downward trend is consistent with the overall narrative of cooling inflation and potential rate cuts.
The recent rise in Bitcoin price is also attributed to broader market conditions. As traditional assets become more volatile, investors have begun to look for alternative options that are thought to offer better inflation protection and potentially higher returns. Bitcoin fits the bill nicely with its limited supply and decentralized structure.
How is Bitcoin affected by data?
While upcoming CPI data is undoubtedly very important, the overall economic outlook is critical. Additionally, the Fed’s subsequent policy decisions will play a key role in determining Bitcoin’s long-term price movement. If inflation continues to cool and the Fed maintains a dovish stance, Bitcoin could be poised for further gains in the coming months. However, unforeseen events or a change in market sentiment can quickly change the course of its trajectory.
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