Bitcoin Rises Slightly After Key Inflation Data Comes Out Better Than Expected


Bitcoin prices have been under pressure in 2022 after the collapse of algorithmic stablecoin terraUSD and subsequent bankruptcy filings by lender Celsius and hedge fund Three Arrows Capital.

Nicolas Economou | Nurphoto | Getty Images

Cryptocurrency prices rose slightly but briefly on Wednesday after April’s Consumer Price Index report.

Bitcoin lost an earlier gain of more than 2% and last hovered above the fixed line at $27,748.24, according to Coin Metrics. At one point, it moved above $28,000. Ether also cut gains and last rose less than 1% to $1,854.33.

Investors turned bullish after the CPI report showed the inflation rate fell on an annual basis to 4.9% in April, slightly lower than economists polled by Dow Jones expected. .

“When it comes to inflation data, bitcoin assumes its identity as a riskier asset,” said Callie Cox, analyst at investment firm eToro. “Bitcoin has outperformed the S&P 500 on five of the last six CPI days – and is on track to do six out of seven with today’s gains.”

“Inflation is down, as the Fed had expected, and that is easing fears about the future of the economy,” she added. “Falling inflation also argues for an end to rate hikes, and higher rates are what triggered the crypto winter over a year ago.”

A lower-than-expected CPI further bolsters market expectations for rate hikes to halt and rate cuts to end at some point this year, said Steven Lubka, managing director of Swan Bitcoin.

“Ultimately, this represents an easing of tight liquidity conditions, an environment in which bitcoin has performed extremely well historically,” he said.

Bitcoin’s correlation with the S&P 500 hit all-time highs in 2022 as the Federal Reserve raised interest rates throughout the year. The price of the flagship cryptocurrency fell 65% in 2022.

However, this link with equities has diminished this year. At the same time, the price of bitcoin and its correlation with gold have increased. The crypto has also found other catalysts beyond inflation and the Fed, namely the regional banking crisis and regulatory repression in the United States. More recently, market players have drawn their attention to Ordinals, a protocol that allows digital content to be stored and exchanged on the Bitcoin blockchain and memecoins.

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