Crypto Markets React to Cooling Inflation Data
The cryptocurrency market witnessed a resurgence as recent inflation data suggested a slowdown in rising prices. Core inflation, a key metric that excludes food and energy costs, registered a modest 0.2% increase month-over-month and a 2.6% rise year-over-year — both figures slightly lower than economists had anticipated. As a result, Bitcoin, Ethereum, and other major cryptocurrencies saw notable gains.
What Cooling Inflation Means for Investors
Inflation trends are a crucial factor in shaping monetary policies, particularly for the U.S. Federal Reserve. According to government data, overall inflation, including food and energy prices, rose just 0.3% from the previous month, aligning with market expectations. On an annual basis, inflation stood at 2.7%, edging closer to the Federal Reserve’s target of 2%.
Financial markets, including stocks and cryptocurrencies, took this news positively. Stock market futures rallied as investors grew optimistic that the Federal Reserve might maintain interest rates during its upcoming meeting. This sentiment was further supported by the CME Group’s FedWatch tool, which suggests rate cuts are unlikely until June.
Bitcoin Leads Crypto Market Gains
The softer inflation data spurred bullish momentum within the crypto market. Bitcoin climbed by 1.7% over 24 hours, reaching over $93,000 — its highest level in nearly a week. Ethereum also performed well, trading around the $3,200 mark and maintaining support above $3,000 despite earlier selling pressure.
The rapid price movements led to more than $193.5 million in liquidations within 24 hours, primarily from short positions, which accounted for roughly $120.3 million of the total, according to Coinglass.
Outlook for Crypto and Inflation
While the Federal Reserve closely monitors inflation trends and labor market performance, December’s data is unlikely to prompt significant shifts in its monetary policy. However, cooler inflation is a promising sign for both investors and policymakers, signaling a return to more stable economic conditions.
For crypto enthusiasts, the market’s reaction to inflation data reaffirms its potential as an alternative investment during periods of shifting economic indicators.
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