Bitcoin Price Surges Above $100K Amid CPI Data and Growing Speculation of Fed Rate Cuts
Bitcoin rose on Thursday, well into an overnight rally as US consumer inflation data came in line with forecasts, boosting investor sentiment.
And the data confirmation of speculation about a December interest rate cut further fueled risk appetite in financial markets.
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Bitcoin breaks out of recent trading range:
Having reclaimed all the losses incurred for a week, the world’s largest cryptocurrency signaled a strong recovery.
It also broke out of the trading range of between $90,000 to $100,000 that constrained it in recent weeks. By 00:47 ET (05:47 GMT), Bitcoin had risen 3.5%, reaching $100,875.9.
Other broader cryptocurrency markets also rallied, with many altcoins surpassing Bitcoin as risk appetite increased. Speculation about more favorable U.S. crypto regulations under a potential Donald Trump presidency fueled the bullish sentiment throughout the market.
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CPI data fuels rate-cut speculation
Consumer Price Index (CPI) data published last played a key role in shaping market sentiment. The inflation numbers were in line with expectations, so investors increased their bets on a 25-basis-point rate cut from the Federal Reserve in December.
While the reading of CPI pointed out that the inflation was still persistent, the question still remains over long-term interest rates. However, such a view of lower interest rates in the near term prompted a speculative assets rally, while also pushing indices on Wall Street to record overnight trading in the stocks.
Lower interest rates mainly help speculative assets such as cryptocurrencies, since they diminish the opportunity cost of holding non-yielding investments. This is why, historically speaking, this has always been an engine behind crypto market rallies.
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Microsoft Shareholders Reject Bitcoin Investment Proposal
While optimism pervades the crypto market with tons of bulls, Microsoft Corporation’s NASDAQ:MSFT shareholders had a different opinion on a resolution to put Bitcoin on its balance sheet.
The proposal was by the National Center for Public Policy Research, which contended that Bitcoin is a good hedge against inflation.
Despite the lobby efforts by the think tank, the shareholders and board of Microsoft voted against the proposal. The board had already mentioned a desire for steadier investment assets due to caution about embracing cryptocurrency.
Little came of the comments from Michael Saylor, CEO of MicroStrategy and outspoken Bitcoin proponent. His strategy to be aggressively invested in Bitcoin has given the company stock a rise of 450% this year.
What this means is MicroStrategy now serves as a proxy for investment in Bitcoin, but had no impact on the conservative investments made by Microsoft.
Altcoins Catch Momentum with Bitcoin
The broader cryptocurrency market mirrored Bitcoin’s upward trajectory, with many altcoins recovering losses incurred over the past week. Ethereum, the world’s second-largest cryptocurrency, rose 6.9% to $3,911.99, while XRP climbed 4.1% to $2.4225.
Cardano, Solana, and Polygon the other significant altcoins all posted between 5% and 15% gains. Even meme coins such as Dogecoin didn’t miss the party, posting 6.4% growth in value.
The performance of altcoins reflected a generally solid recovery of the cryptocurrency space, supported by renewed optimism among investors and prospects for favorable macroeconomic environments.
Positive Crypto Markets
Bitcoin’s bounce back above $100,000, supported by positive CPI data and rate-cut speculations, is a significant point in its recent price action.
The rally in the broader crypto market further emphasizes the strength of digital assets against macroeconomic headwinds.
While there are still unknowns, especially about the inflationary trend in the long term and regulatory news, current market momentum indicates robust investor confidence in cryptocurrencies.
Institutional and retail investors alike consider digital assets as part of a diversified portfolio, further supported by the possibility of acting as an inflation hedge and a devaluation hedge.
As the Federal Reserve approaches its December meeting, market participants will watch closely for further clues about the direction of interest rates in economic data and policy announcements.
Meanwhile, the cryptocurrency market’s ability to adapt and thrive amidst these dynamics reinforces its growing importance in the global financial landscape.