Markets
Bitcoin returns to $66,000 as US inflation data shows relief
Consumer price data in the United States was released on Monday, May 15. The main consumer price index (CPI), which measures the underlying United States inflation, rose less than expected in April. It rose 0.3% since March, marking the first time in six months.
This data suggests a possible downward trend in inflation, fueling hopes for a future cut in interest rates by the Federal Reserve.
Crypto Market Rebounds as US Inflation Slows, But Will It Last?
However, Fed officials need more data before considering rate cuts. Fed Chair Jerome Powell on Tuesday She said the central bank “will have to be patient and let restrictive policy do its job”. Furthermore, some politicians do not expect rate cuts this year.
To know more: How to protect yourself from inflation using cryptocurrency
US CPI percentage change (April 2023 – April 2024). Source: US Bureau of Labor Statistics
Despite this, inflation news has fueled optimism in financial markets, including cryptocurrencies. The price of Bitcoin (BTC) jumped from $62,000 to $66,000, an increase of around 7% in 24 hours.
Even the major altcoins found significant gainswith Ethereum (ETH) e Solana (SOL) up by 4.4% and 12.3% respectively. As a result, the total cryptocurrency market capitalization increased by 6.7% to $2.5 trillion, according to CoinGecko. data.
Analysts believe that factors beyond easing U.S. inflation have also influenced Bitcoin’s recent rally. CryptoQuant analysts believe that “less selling pressure” contributed to the situation.
“Reduction of sales pressure [is] evident in the short term Bitcoin holders selling with virtually zero profits and traders have exhausted their unrealized profits in recent months. [Furthermore]Bitcoin balances are at [over-the-counter] OTC desks are stabilizing, which suggests there is less supply of Bitcoin coming to the market for sale through these entities,” they told BeInCrypto.
However, for the rally to be sustainable, demand growth needs to accelerate. While there are signs of increasing demand from long-term bond holders and large investors, the pace needs to be picked up. Furthermore, CryptoQuant analysts have noticed this spot purchases of Bitcoin exchange-traded funds (ETFs). remained minimal, and stable currency liquidity growth still needed to improve.
Furthermore, the price of Bitcoin remains undervalued for a miner’s profitability perspective. Following the Bitcoin halving At the end of April 2024, miners’ rewards were halved, putting financial pressure on them. Historically, miners’ extremely low profitability is often associated with bottoming out prices, suggesting potential for future growth.
To know more: Bitcoin Price Prediction 2024/2025/2030
Overall, analysts and industry experts remain optimistic The long-term trajectory of Bitcoin. As the cryptocurrency market continues to evolve, macroeconomic conditions, regulatory developments and political factors will play a crucial role in shaping its future.
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