Bitcoin surges past $84,000 on US inflation data, Fed policy; What’s next for crypto market?
Despite Bitcoin's recent rally, uncertainties surrounding global trade tensions and Federal Reserve policies continue to cloud market sentiment.
World's biggest cryptocurrency Bitcoin surged past $84,000 on Wednesday after U.S. inflation data revealed a sharper-than-expected decline, reinforcing hopes that the Federal Reserve may ease monetary policy sooner than anticipated.
The U.S. Consumer Price Index (CPI) increased by 2.8 per cent year-over-year in February, a decline from the 3 per cent growth recorded in January and falling short of the anticipated 2.9 per cent, as reported by the U.S. Bureau of Labor Statistics.
The lower inflation reading moves closer to the Federal Reserve's 2 per cent target, a critical benchmark that could shape upcoming interest rate decisions. Following the announcement, Bitcoin surged within minutes, continuing its recovery from last week's decline.
“The current crypto market environment provides an interesting contrast of retail sentiment and institutional adoption. The U.S. is allegedly hoarding Bitcoin reserves and driving legislative initiatives such as 'The Bitcoin Act' without taxpayer expense, while traders are showing declining interest, resulting in reduced crypto trading volumes. And still, Bitcoin continues to show high volatility with cautioning about possible further crashes. But macroeconomic incidents such as the recent U.S. CPI report have injected short-term booster shots into crypto markets, enabling assets such as PEPE to outperform large memecoins such as DOGE and SHIB,” said Avinash Shekhar, Co-Founder & CEO, Pi42.
Earlier today, Bitcoin stabilized at $82,700, rebounding from its recent decline below the 200-day Exponential Moving Average (EMA) of $85,664 on Sunday. The cryptocurrency experienced a sharp 9.14 per cent drop in a single day, finding support at $78,258 before recovering by 5.52 per cent on Tuesday, as per CoinMarketCap data.
What's weighing on Bitcoin prices?
Despite Bitcoin's recent rally, uncertainties surrounding global trade tensions and Federal Reserve policies continue to cloud market sentiment.
A recent Bitfinex report, as quoted by CNBC TV18, highlighted a mixed macroeconomic backdrop, noting steady job growth, rising wages, and efficiency gains, but also inflationary pressures and cautious business expansion.
In February, the U.S. labor market demonstrated resilience by adding 151,000 jobs; however, the unemployment rate edged up to 4.1%, primarily due to significant federal job cuts across various agencies.
While robust wage growth typically bolsters consumer spending, persistent inflation concerns may complicate expectations for multiple Federal Reserve rate cuts this year.
“This paradigm shift portends divergence; governments and institutions are waking up to the strategic importance of Bitcoin, while retail investors tread slowly, reacting to short-term price corrections. The long-term implications of nation-state Bitcoin adoption have the potential to transform the financial order, regardless of market cycles,” Shekhar added.
Historically, a cooler inflation print has boosted risk assets like cryptocurrencies, as it raises bets on Fed rate cuts. However, President Trump's aggressive trade policies have introduced additional uncertainty, prompting some investors to pivot towards safe-haven assets like gold rather than speculative markets like crypto.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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