- Bitcoin, Ethereum price breaks higher on CPI data
- Wall Street expected the CPI data to come in lower because of cooling inflation.
- The lower CPI helped Bitcoin and Ethereum price rally.
Following a recent Consumer Price Index (CPI) data released by the U.S. Bureau of Labor Statistics, Bitcoin (BTC) and Ethereum (ETH) prices recorded an impressive move up.
With investors anticipating softer inflation and a minor interest-rate increase from the Federal Reserve this week, U.S. stocks jumped on Monday, December 12, as the market prepared for the CPI data release. When the data was finally out, the Dow Jones futures went up by 2.5%, the S&P 500 and Nasdaq futures soared nearly 2.8% and 3.5%, respectively, and cryptocurrency prices pumped!
US CPI Inflation Records 7.1% For November
The U.S. Bureau of Labor Statistics released the November CPI data of 7.1% on December 13, which was against the market expectations of 7.3%. The Core CPI comes in at 6.0% against the expected 6.1% in November, falling from 6.3% in October.
From the report, the energy index soared by 13.1%, while the food index was up by 10.6%. Notably, these increases were smaller compared to the period ending October. Nevertheless, compared to September before that, the CPI was up 0.1% only, lower than the forecasted 0.3%.
The report also contradicts Wall Street’s expectations, which had observed inflation rates cooling off and speculated that the CPI data would come in lower. While JPMorgan had also predicted a 10% rally in stocks if the U.S. CPI data came at 6.9% or lower, the most prominent American bank was also expecting a CPI data reading of 7.2%.
Cryptocurrencies respond to CPI Data Release
Cryptocurrencies responded to the inflation data, with the big crypto Bitcoin (BTC), rallying more than 3% within an hour of the data release. In the last 24 hours, the BTC price is now up 3.6% from a low of $16,944 to a high of $17,711 and a trading volume that has since risen more than 25% to $29,584,222,849, a sign of trading activity.
Ethereum (ETH) price has also rallied more than 3% following the inflation data release. The second largest crypto by market cap is trading at $1,308, up by 4.3% in the last 24 hours. Meanwhile, with a 24-hour low of $1,246 and a high of $1,338, Ethereum has indicated a rally of more than 7% as its trading volume rises 35% in the last day.
In recent times, the U.S. stock market has shown less correlation with cryptocurrency. Despite the disparity, the lower CPI also aided Bitcoin and Ethereum in recording a price rally.
Renowned analysts Michael van de Poppe and Jordan Belfort, alias the Wolf of Wall Street, had also predicted that Bitcoin and Ethereum prices could soar as the Christmas holidays approached. The speculations were based on the U.S. CPI and Fed rate hike, the key factors indicating the bottom of the crypto market.
Bitcoin Price To Rally More With Dovish Fed
November’s CPI plunge is expected to influence the interest rate hike decision by the Federal Reserve on December 14. Accordingly, during the FOMC Press Conference, Fed Chair Jerome Powell hinted at a slowdown in the rate hike pace in December and subsequent months, saying, “the Fed is strongly committed to restricting inflation.”
According to Powell, it is appropriate to slow the rate hikes at some point down the line, hinting at a potential slowing down of rate hikes within the next two meetings. However, he affirmed that no such decision had been taken then and will be discussed in the next meeting in December.
Based on the CME FedWatch Tool, 50 basis points are probable (50 bps) rate hikes before the CPI number was 72.3%.
Following the CPI data, the probability of a 50 bps rate hike leaped over 80%. Meanwhile, the U.S. Dollar Index fell by 1.30% to 103.70 after the CPI numbers. Investors can expect an increase in Bitcoin and Ethereum prices in the coming weeks.