Bitcoin BTC price moves back above $22K after tepid inflation reading
The largest cryptocurrency by market cap recently traded above $22,200, a gain of more than 3% in the past 24 hours. BTC had lingered below $22,000 for the past five days due to growing investor concerns about stablecoin regulation and US central banks’ anti-inflation measures.
January’s CPI rose 0.5% against 0.1% a month earlier, in line with the economist’s forecasts. But year-on-year inflation was hotter than expected, hitting a pace of 6.4% versus 6.5% in December and against forecasts of 6.2%. Year-on-year core CPI – which strips out more volatile food and energy costs – was faster than forecast at 5.6% versus 5.5% expected and down from 5.7% a month earlier.
The data suggested the Federal Reserve would remain hawkish with more interest rate hikes pending upcoming Federal Open Market Committee (FOMC) meetings. The CME FedWatch tool currently shows that about 90% of traders see the FOMC raising rates by 25 basis points in March.
Investor reaction fluctuated significantly in the immediate aftermath of the CPI release with bitcoin (BTC) first falling on the news and quickly gaining $700 to trade as high as $22,300 before retreating slightly to today’s levels.
“The market may be pricing in a bit more Fed tightening, but it’s not weighing heavily on crypto today,” Edward Moya, senior market analyst for forex market maker Oanda, wrote in a Tuesday note. “Regulatory and contagion risks have pressured Bitcoin this month, so the downward movement was potentially exhausted.”
Ether (ETH), the second-largest cryptocurrency by market capitalization, rose nearly 5% from the same time on Monday to trade above $1,550, recovering losses from the past few days. The CoinDesk Market Index, which measures the overall performance of the crypto market, was recently up 3.7% for the day.
Equity markets were mixed, with the S&P 500 recently up 0.1%. The Dow Jones Industrial Average (DJIA) fell 0.2%, while the tech-heavy Nasdaq Composite was up 0.6%.
Joe DiPasquale, CEO of crypto fund manager BitBull Capital, told CoinDesk that he would not be surprised to see gains following the CPI release disappear by the end of this week. DiPasquale highlighted that crypto prices have typically risen after previous CPI releases in the past “only to fall in the following days.” He said he will look for BTC and ETH to test $20,000 and $1,250 respectively.
Michael Safai, managing partner at quantitative trading firm Dexterity Capital, noted in an emailed comment that regulation now trumps inflation concerns in crypto markets.
“Inflation data and Fed meetings may well not have the same push-pull effect on crypto prices as they did in 2022, because regulation is quickly becoming the biggest influence on crypto sentiment.”
Sheraz Ahmed, managing partner at STORM Partners, told CoinDesk that BTC’s recent falls and rebounds on Tuesday were “relatively muted, with only a few hundred dollars on either side.”
“This was one of the quietest CPI days in recent months,” Ahmed said. “The last CPI print was lower, which partly induced the January rally; but with the opposite results today, markets could become more unpredictable.”
