Bitcoin has changed direction after weeks of retreat during which crypto investors dumped risky assets.
The cryptocurrency rose 4% in the past 24 hours to $100,000 immediately following the release of closely-watched inflation data. After falling on Monday to $90,600, a low for the month, it has soared 10%.
Bitcoin’s rebound is benefitting the rest of the market, too. The crypto industry’s market cap grew $150 billion in the last 24 hours with altcoins Ethereum gaining 8% and Solana soaring 9%.
“Bitcoin is up today because both yesterday’s producer price index and today’s consumer price index were relatively moderate,” said Zach Pandl, head of research at digital asset manager Grayscale. “It raises confidence about disinflation in the economy and the likelihood of Fed rate cuts this year.”
Demand for Bitcoin grew shortly after the Bureau of Labor Statistics reported that the consumer price index, or CPI—a measurement of inflation determined by analyzing the average price change of everyday goods and services over time—had increased in December, in line with economists’ expectations.
However, it seems investors are hopeful about the core CPI annual rate, which excludes volatile food and energy costs. It has decreased since November, coming in lower in December than economists had forecasted.
According to Pandl, this data raises the probability that the Federal Reserve will continue to cut interest rates, which is usually bullish for assets that compete with the dollar like gold and Bitcoin.
“Today’s data put Fed rate cuts back on the table, and should put a dent in the strong dollar trade over the short term,” he said. “Those macro factors are helpful for Bitcoin.”
Pandl also noted that the rise might indicate that investors are beginning to price in the potential for positive crypto-specific announcements during the early days of Trump’s administration, following his inauguration next week.
The next Fed meeting is scheduled for Jan. 28 and Jan. 29. At their last meeting, Fed members signaled that there would be fewer-than-expected interest rate cuts in the coming year, depressing the crypto market and sending Bitcoin tumbling.
Before that, Bitcoin was on a historic run during which the currency broke $100,000 for the first time, triggered by anticipation that Trump would end the Biden Administration’s crackdown on the crypto industry. During the run, on Dec. 17, Bitcoin reached an all-time high of $108,000.