Bitcoin and altcoins rose after the US CPI data: what next?

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Following the release of ambiguous consumer inflation figures by the United States, Bitcoin and many other alternative coins appeared to regain some ground in a recent uptrend.

Bitcoin hit a new high of $99,000 since January 7th, marking a 10% climb from its recent low. This surge in BTC has sparked further growth in other cryptocurrencies, including Virtuals Protocol (VIRTUAL), AI16Z, and Algorand (ALGO), all of which saw gains exceeding 13%.

The surge in cryptocurrencies also impacted other investment areas. For instance, futures associated with the Dow Jones Industrial Average climbed by approximately 700 points, while those linked to the S&P 500 index saw a boost of around 100 points. Concurrently, yields on bonds decreased significantly. Specifically, the 10-year, 30-year, and 5-year yields fell to 4.66%, 4.90%, and 4.48% respectively.

According to data from the U.S. Bureau of Labor Statistics, the main measure of consumer prices (the Core Consumer Price Index) decreased slightly from a 0.3% increase in November to just a 0.2% rise in December. On an annual scale, this decrease in core inflation brought it down from 3.3% to 3.2%.

In contrast, the Consumer Price Index (CPI) went up from 0.3% to 0.4% in December, which equates to a yearly rise of 2.9%.

The key monthly inflation figure from the US Consumer Price Index (CPI) was reported lower than anticipated. To be precise, the core CPI increased by 0.2% in December, contrary to the predicted 0.3% rise, causing the annual measure to land at 3.3%. Additionally, the overall figure (Headline) climbed by 0.4%.

— Mohamed A. El-Erian (@elerianm) January 15, 2025

Bitcoin and various alternative cryptocurrencies saw an uptick following the release of optimistic core inflation figures. Core inflation, a metric that disregards fluctuating food and energy costs, is significant to the Federal Reserve as it monitors changes in the economy. The recent decrease in the Core Consumer Price Index has sparked speculation among traders that the Fed could implement more than two interest rate reductions throughout the year.

Despite a glimmer of hope from the inflation report, there are lingering concerns. Inflation persists above the Federal Reserve’s 2.0% benchmark, and it appears that it might remain high for an extended period. Furthermore, the ongoing wildfires in Los Angeles could potentially lead to increased costs for services like insurance and housing rentals.

Moreover, certain policies proposed by Donald Trump, like mass expulsions and import taxes, might result in increased inflationary pressures during the current year.

Bitcoin price analysis

Over the last several days, the day-to-day graph indicates that Bitcoin has been steadily bouncing back. This upward trend started following the appearance of a long-bodied candlestick pattern known as a doji on Monday, which is commonly interpreted as a sign of a bullish reversal.

Bitcoin has climbed beyond the 23.6% Fibonacci Retracement threshold at approximately $94,210 and exceeded its 100-day Exponential Moving Average. Moreover, it has also risen above $91,535, a significant support level it has maintained since November.

In the days to come, Bitcoin might surge further due to investor expectations surrounding Donald Trump’s upcoming inauguration. If the positive trend persists, Bitcoin could challenge its previous record high of around $108,000. Conversely, a dip below this week’s lowest point at $89,000 would cast doubt on the bullish prediction.

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2025-01-15 17:44