Bitcoin jumps more than 2%, crosses $66,000

Bitcoin peaked around $66,500, before paring gains and holding near $66,000

Bitcoin climbed more than 2% to end the week, reaching $66,000 on Friday. This rise comes as positive inflation data fuels optimism amongst investors, and as spot Bitcoin ETFs saw large inflows on Thursday.

Bitcoin peaked around $66,500 on Friday just before noon, before paring gains and holding near $66,000. The biggest crypto currency has not reached such a high since late July. Ethereum also surged on Friday morning, climbing nearly 2% from $2,644 to $2,699 within forty-five minutes.

The current crypto upswing, which still leaves Bitcoin a ways from its all-time high of $72,000, seems to be based on a number of factors.

This morning, the U.S. Bureau of Economic Analysis (BEA) released the Personal Consumption Expenditures (PCE) Price Index for August 2024. The index is a key gauge of inflation in the U.S. economy. The report showed that inflation has slowed to 2.2% from August last year, a sharp decline compared to 2.5% reported in July and the lowest since 2021.

These numbers seem to validate the U.S. Fed’s recent decision to ease monetary policy, which came last week as Fed Chair Jerome Powell announced interest rate cuts of 50 bps, a more aggressive cut than some were expecting. These lower-than-expected inflation rates can increase the appeal of volatile assets such as Bitcoin.

Inflation rates are not the only factor driving Bitcoin’s run. Thursday saw large inflows in spot Bitcoin exchange traded funds to the tune of $365 million, the highest since July 21, as per SoSoValue data. These ETFs saw inflows across the board, except for Grayscale Bitcoin Trust which has been seeing a drop in investments since January.

ARK Invest’s 21Shares Bitcoin ETF led the charge with net inflows of around $114 million, followed by BlackRock’s iShares Bitcoin Trust collecting $93 million. Fidelity’s Wise Origin Bitcoin Fund came in third with $74 million and smaller inflows were reported by the rest of the eleven. Grayscale Bitcoin Trust saw outflows of around $8 million. Since the U.S. SEC approved these ETFs in January, the sector has raked in $18 billion cumulatively, with highest daily net inflows reported back in March.

Another factor that could be contributing to Bitcoin’s run is the recent change in China’s economic policy. This week, the PBOC said it is considering injecting up to 1 trillion yuan ($142 billion) into its biggest state-owned banks to kickstart the slowing economy. The PBOC also announced a reduction in interest rates on loans to commercial banks by 50 bps. Bitcoin’s price has had strong correlation with the PBOC’s balance sheet and these developments over the last thirty days, as per Coindesk.