Bitcoin breaks $25K as US inflation slows to 6% in February
February inflation in the US fell to 0.4% from 0.5% in January, in line with economists’ estimates, the Bureau of Labor Statistics (BLS) said on Tuesday.
On an annual basis, inflation slowed to 6.0% from 6.4% the previous month, also in line with estimates.
Core inflation – which strips out food and energy costs – rose more than forecast to 0.5% in February from 0.4% in January, and against forecasts of 0.4%. The year-over-year core rate was 5.5%, as expected, compared with 5.6% in January.
Bitcoin (BTC) prices rose to a nine-month high of $25,484 in the minutes following the report. The world’s largest cryptocurrency by market capitalization then extended its advance, surpassing the $26,000 mark for some time before settling back into the $25,500 range recently.
Inflation worries have become secondary in recent days as investors, the government and the Federal Reserve have had to deal with the possible systemic implications of more bank failures.
Less than a week ago, traders were betting that the Fed would raise the benchmark fed funds rate by 50 basis points at the March meeting. After the collapse of Silicon Valley Bank on Friday and the closing of Signature Bank over the weekend, traders swung quickly and prices now see only the slightest chance of any rate hikes in March and rate cuts by mid-summer.
“The macro backdrop is moving from tightening to significant loosening, or at least this is what the market is predicting,” Bob Ras, co-founder of Sologenic, a blockchain-powered securities tokenization network, wrote CoinDesk in an email. “Bitcoin and digital assets tend to lead the way in anticipating these kinds of macro shifts, which is why we’re seeing a marked uptick in the crypto market.”
Ras noted that the CPI was falling and that “liquidity injections to strengthen the banking sector have an effect similar to quantitative easing.”
“The conditions for a sustained rally for Bitcoin and other digital assets are ripe – and these conditions of banking instability and resulting monetary turbulence are exactly why Bitcoin was created in the first place,” he said.
UPDATE (March 14, 2023, 12:55 UTC): Adding chart, 24 hour bitcoin performance.
UPDATE (14 March 2023, 13:16 UTC): Updating bitcoin’s price performance.
UPDATE (14 March 2023, 16:42 UTC): Adding Ra’s quote.
