Markets
Bitcoin back to $66,000 as US inflation data shows relief
US consumer price data was released on Monday, May 15. The core consumer price index (CPI), which measures underlying U.S. prices inflation, increased less than expected in April. It rose 0.3% compared to March, marking the first time in six months.
This value suggests a possible downward trend in inflation, raising hopes of a future cut in interest rates by the Federal Reserve.
Crypto Market Rebounds as US Inflation Slows, But Will It Last?
However, Fed officials need more data before they consider rate cuts. On Tuesday, Fed Chairman Jerome Powell he said the central bank “will need to be patient and let restrictive policy do its work”. Additionally, some policymakers do not foresee rate cuts this year.
See more information: How to protect yourself from inflation using cryptocurrency
US CPI Percentage Change (April 2023 – April 2024). Source: US Bureau of Labor Statistics
Despite this, news about inflation has increased optimism in financial markets, including cryptocurrencies. The price of Bitcoin (BTC) jumped from $62,000 to $66,000, an increase of about 7% in 24 hours.
Top altcoins too made significant gainswith Ethereum (ETH) and Solana (SUN) increasing 4.4% and 12.3%, respectively. Consequently, the total cryptocurrency market capitalization expanded by 6.7% to reach $2.5 trillion, according to CoinGecko data.
Analysts believe that other factors, in addition to easing inflation in the US, also influenced Bitcoin’s recent recovery. Analysts at CryptoQuant see that “lower selling pressure” contributed to the situation.
“Less selling pressure [is] evident in the short term Bitcoin Holders selling for basically zero profit and traders exhausting their unrealized profits from the past few months. [Furthermore]Bitcoin balances on [over-the-counter] OTC desks are stabilizing, which suggests there is less supply of Bitcoin entering the market to sell through these entities,” they told BeInCrypto.
However, demand growth needs to accelerate for the recovery to be sustainable. Although there are signs of increasing demand from long-term holders and large investors, the pace needs to accelerate. Additionally, CryptoQuant analysts noted that spot purchases of Bitcoin exchange-traded funds (ETF) remained minimal and stable coin liquidity growth had not yet improved.
Furthermore, the price of Bitcoin remains undervalued due to a mining company’s profitability outlook. Following the Bitcoin halved At the end of April 2024, miners’ rewards were halved, putting financial pressure on them. Historically, extremely low mining profitability is often associated with rock bottom prices, suggesting potential for future growth.
See more information: Bitcoin Price Prediction 2024/2025/2030
Overall, analysts and industry experts remain optimistic Bitcoin’s Long-Term Trajectory. As the crypto market continues to evolve, macroeconomic conditions, regulatory developments and political factors will play crucial roles in shaping its future.
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