Good news out of the US regarding inflation sent Bitcoin’s price soaring to $83,500 today, thanks to encouraging Consumer Price Index (CPI) data for February. Ethereum (ETH) wasn’t far behind, nearing $2,000, and several other cryptocurrencies like XRP, Solana, and Cardano all saw impressive gains of over 5% in the wake of the CPI report.

The positive CPI report also boosted confidence in the traditional stock market. Futures for the Dow Jones and Nasdaq 100 jumped more than 300 points, while S&P 500 index futures climbed by 60 points.

Bitcoin price rises as US CPI Crashes

As more positive inflation figures from the US were released, Bitcoin continued its ascent, reaching $84,000 and closing in on the significant resistance level of $85,000.

Specifically, the main CPI figure decreased from 0.3% in January to 0.2% in February, which was better than the anticipated 0.5%. This improvement pushed the annual inflation rate down from 3.0% to 2.8%, again, lower than the forecasted 2.9%.

Even core inflation, which takes out volatile categories like food and energy costs, showed a significant drop to 3.1% – the lowest it has been in years.

These positive economic signals really got the crypto market moving. Bitcoin surged past $84,000, and the total market capitalization of all cryptocurrencies increased by over 2%, reaching a hefty $2.70 trillion.

However, it’s important to consider the bigger picture. Donald Trump’s recent decision to impose tariffs on imported goods could muddy the waters. These tariffs are expected to push consumer prices higher as businesses adjust to the increased costs.

Focus on FOMC Decision

This encouraging CPI data arrives as everyone’s eyes are on the upcoming Federal Reserve (FOMC) interest rate decision, scheduled for March 18-19. Economists are keenly waiting to see if the Fed will give any hints about their plans for the coming months, especially with potential concerns that US inflation might start to climb again. Ryan Lee, Head of Bitget Research, shared his thoughts with CoinGape in an email statement:

“Bitcoin price might stagnate or drop from its current $83,000-$76,000 range, especially if a hawkish outcome strengthens the dollar and yields, pressuring risk assets. Even a dovish surprise like a rate cut may fail to ignite a sustained rally, given potential market skepticism and overriding macro uncertainties, while the end of quantitative tightening offers only modest support at best.”

The bond market seems to believe the Federal Reserve will prioritize US economic growth and signal potential interest rate cuts later in the year. They’ve been suggesting the possibility of three rate cuts this year, especially given the increased talk of a potential recession.

Why is falling inflation good news for Bitcoin? It’s largely because of how it influences the Federal Reserve. Typically, when inflation cools down, the Fed tends to lower interest rates to boost consumer spending and stimulate the economy. We saw this play out in 2020 and 2021, where Bitcoin prices soared as the Fed dropped rates to almost zero. Similarly, earlier in 2024, Bitcoin rallied again as the Fed hinted at future rate cuts.

crispus

Crispus is a seasoned Financial Analyst at CoinGape, bringing over 12 years of experience to the table. His expertise lies in Bitcoin and other altcoins, focusing on the dynamic intersection of news and in-depth market analysis. His well-regarded insights can be found on prominent financial platforms like BanklessTimes, CoinJournal, HypeIndex, SeekingAlpha, Forbes, InvestingCube, Investing.com, and MoneyTransfers.com.

Disclaimer: The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.