Markets
Cryptocurrency Markets Surge as Inflation Hits Three-Year Low
Investors expect the Federal Reserve to cut interest rates later this year.
Cryptocurrency markets rallied on Thursday after data revealed that US inflation fell to its lowest level in more than three years in June.
According to According to the Labor Department, the consumer price index (CPI) — which measures the cost of goods and services — fell 0.1% in June. That brought the annual rate down to 3%, the lowest since April 2021. Excluding food and energy prices, the core CPI rose 0.1% on the month and 3.3% year-over-year.
That data was lower than expected, with Dow Jones analysts previously forecasting a 0.2% monthly increase and a 3.4% annual increase, according to the Bureau of Labor Statistics.
Falling inflation gives the Federal Reserve more room to potentially cut interest rates later this year.
The data also comes after Federal Reserve Chairman Jerome Powell insinuated on potential rate cuts during his testimony to Congress on Tuesday. Powell warned that prolonged high interest rates could hurt the U.S. economy, and noted that a cooling labor market indicates that inflationary pressure is easing.
Cryptocurrency markets react
Bitcoin (BTC) responded with a 2% price jump in the last 24 hours to trade above $59,000, while Ethereum (ETH) rose 3% and tested $3,200.
The rally extended the recovery in digital assets after the weekend’s violent sell-off.
BTC fell 16.5% to a low of $53,500 on July 5 after reaching a local high of $63,800 on July 1. Glassnode, an on-chain analytics platform, described the drop as Bitcoin’s “deepest correction since late 2022.”
“Between May and July, the market experienced its deepest cycle correction, recording a decline of over -26% from the all-time high,” Glassnode said in a July 7 statement. report.
Among the top 100 cryptocurrencies by market capitalization, Stacks (STX) led the way with a single-day gain of 12%. Zk Synchronization (ZK) and Aave (AAVE) also performed well, rising 6.5% and 6.1% respectively. Polka dot (PERIOD) and Solana (SOL) both recovered by 0.5%.
In the last 24 hours, 34,000 crypto traders were liquidated, totaling $96 million in liquidations, according to for CoinGlass data. Despite the bullish market momentum, long positions accounted for 57% of margin calls.
In the stock market, futures tied to the S&P 500, Nasdaq 100 and Dow Jones Industrial Average jumped 0.3%.
Related: Is This the End of the Crypto Bull Market? History Says No