Crypto markets rally as softer U.S. inflation data boosts digital assets

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16th May 2024 – (New York) The cryptocurrency market experienced a surge on Wednesday following the release of lower-than-expected U.S. inflation data, providing a jolt to digital assets that had been stagnant. Bitcoin (BTC) surpassed $66,000 for the first time since April 24, recording a more than 7% increase in the past 24 hours. Meanwhile, Ether (ETH) traded around $3,000, showing a more modest 4% gain during the same period.

Among the major cryptocurrencies, Solana (SOL) and Near (NEAR) led the gains with jumps of 8% and 12% respectively, while the broader market benchmark CoinDesk 20 Index (CD20) rose by 6%.

The rally was triggered by the release of the April U.S. Consumer Price Index (CPI), which showed a slight decrease from March, coupled with a sluggish retail sales report. This data provided relief to investors concerned about resurging inflation and a rapidly growing economy, which had raised fears of the Federal Reserve reversing its accommodative stance and potentially considering interest rate hikes.

Analysts at Bitfinex commented, “Investors view this as a bullish regime shift, as it marks the first decrease in CPI inflation over the last three months.” They further noted that the Federal Reserve’s earlier announcement of its intention to taper the central bank’s balance sheet run-off was seen as a positive development for risk assets.

The positive sentiment also spilled over to traditional markets, with U.S. equities seeing gains as the S&P 500 index climbed over 1% and reached a new all-time high, signaling the return of risk appetite.

Swissblock analysts highlighted that Bitcoin’s surge marked a break-out from a downward trend that had been limiting price movements in recent weeks. They stated, “BTC [is] finally making the bigger move… Today we got that,” referring to the impact of the CPI and retail sales numbers.

According to Swissblock’s analysis, this breakout paves the way for Bitcoin to rally towards $69,000 initially, and potentially target new all-time highs at around $84,000. The report also predicted strong follow-up performances from altcoins during the next upward leg of the market.