Bitcoin rises marginally after CPI report

Investors grew hopeful after the Consumer Price Index report showed the inflation rate dropped on an annual basis to 4.9 per cent in April

Crypto currency prices got a modest but short rise Wednesday after the April Consumer Price Index (CPI) report.

Bitcoin shed a previous gain of over 2 per cent and was last staying above the flatline at $27,748.24, as per Coin Metrics. At one time it surpassed $28k. Ether also cut gains and was less than 1 per cent higher at $1,854.33.

Investors grew hopeful after the Consumer Price Index report showed the inflation rate dropped on an annual basis to 4.9 per cent in April, which was marginally less than what economists polled by Dow Jones anticipated.

When it comes to inflation data, bitcoin accepts its identity as a riskier asset, according to Callie Cox, an analyst at investment company eToro. Bitcoin has surpassed the S&P 500 on five out of the last six Consumer Price Index days – and it is on way to make it six out of seven with today’s gains.

Inflation is dropping, just as the Federal Reserve expected, and that is reducing concerns about the future of the economy, Cox further said. Lower inflation also supports the case for the end of rate raises, and higher rates are what started the crypto winter more than a year ago.

Consumer Price Index coming in below economists’ prediction further strengthens the markets’ expectation of rate hikes halting, and rate cuts coming at some point during 2023, according to Steven Lubka, managing director at Swan Bitcoin.

Eventually, this represents an alleviation of tight liquidity conditions, an environment in which bitcoin has performed exceptionally well historically, Lubka stated.

Bitcoin’s correlation with the S&P 500 soared to historic highs last year as the Fed hiked interest rates through the year. Bitcoin dipped 65 per cent during the year.

That connection with stocks has dropped in 2023, though. At the same time, bitcoin’s correlation with gold has risen. Apart from inflation and the Fed, there have been other crypto catalysts — the regional banking turmoil and the regulatory clampdown in the U.S. More recently, market participants have had their focus on Ordinals, a protocol that makes it possible to store and trade digital content on the Bitcoin blockchain, and memecoins.