Bitcoin nears $100K as CPI data shows signs of cooling

Key Takeaways

• Bitcoin edges closer to $100K, rising 2% in 24 hours following better-than-expected CPI data for December.
• Declining dollar index and rate cut expectations for June drive optimism across crypto and traditional markets.

Bitcoin is nearing the $100,000 mark, rising over 2% in the past 24 hours after better-than-expected Consumer Price Index (CPI) data fueled optimism in financial markets.

The largest crypto asset by market cap climbed $2,000 following the data release, reaching an intraday high of $99,400. Bitcoin is currently trading at $99,000, consolidating its position as the rally continues.

December’s CPI increased by 0.4%, slightly exceeding analyst expectations and November’s 0.3% rise.

On a year-over-year basis, CPI came in at 2.9%, aligning with forecasts but marking an increase from the previous 2.7%.

Core CPI, which excludes volatile food and energy prices, rose 0.2% month-over-month, consistent with projections and down from November’s 0.3%. Year-over-year, core CPI dipped to 3.2%, slightly below forecasts and the prior month’s rate of 3.3%.

The core pace of inflation, closely monitored by policymakers, remains above 3%, frustrating officials despite the faster decline in headline inflation. However, the data has bolstered market sentiment, as traders now anticipate earlier monetary policy easing.

The dollar index (DXY), often inversely correlated with Bitcoin, declined 0.5% to 108.5 following the CPI release. This marks a significant retreat from its Monday high of 110, triggered by strong labor market data.

The weakening dollar sent both traditional and crypto markets higher, with the SP 500 and Nasdaq opening up 1.4% and 1.7%, respectively.

In the crypto space, Bitcoin’s surge follows weeks of rangebound trading driven by macroeconomic data and monetary policy expectations.

The asset had consolidated below $100,000 since Federal Reserve Chair Jerome Powell’s hawkish comments in December. Strong economic and inflation data initially erased expectations for rate cuts this year, but today’s CPI report reignited optimism.

The CME FedWatch Tool now shows a 44.5% probability of a rate cut at the June 18 meeting, up from 39% in September. However, the likelihood of subsequent cuts remains below 30% for later meetings.

Tuesday’s Producer Price Index (PPI) data for December also showed cooler-than-expected inflation readings, supporting Bitcoin’s rebound from an abrupt drop below $90,000 earlier in the week.