According to statistics from CoinMarketCap, every cryptocurrency in the top 10—aside from stablecoins—rose after the CPI data was made public. The Nasdaq Composite was up 3.34%, and the S&P 500 began 2.64% higher than the previous finish on Tuesday.
The U.S. Federal Reserve is expected to raise interest rates by half a per cent on Wednesday after doing so by 75 basis points in the previous four sessions, despite a slowdown in inflation.
The cost of Bitcoin rose from $16,500 to $17,500 after the report’s publication, a rise of almost 6%. By market capitalisation, Ethereum, the second-largest cryptocurrency asset, increased significantly.
It climbed from about $1,200 to $1,273 in a matter of seconds and is currently trading for $1,330. For ETH, that is a 13% gain over the previous day.
The upbeat print brings much-needed comfort to the markets, which have been battered by the Federal Reserve’s record rapid monetary tightening since 2022.
Jerome Powell, the head of the central bank, has made it clear repeatedly that he intends to keep raising interest rates until U.S. inflation, which this year has reached several 40-year highs, is under control.
Although some have compared Bitcoin and other rare cryptocurrencies to inflation hedges, the market for digital assets has shown a significant two-year correlation with equities. Thursday saw gains of 4% for the S&P 500 and 5% for the Nasdaq.
How Does The U.S. Consumer Price Index (CPI) Work?
Using a basket of products and services, the U.S. Consumer Price Index (CPI) calculates the average change in price over time. It is used to gauge changes in buying power as well as the rate of inflation in the U.S.
The CPI calculation considers several variables, including changes in the cost of living, housing, transportation, health care, and other products. Economists can spot trends in consumer purchasing patterns and forecast future inflation rates by monitoring the CPI figures over time.
It is crucial to comprehend how the US CPI operates to manage personal finances and make wise investment decisions.
What Effect Do CPI Changes Have On The Price Of Crypto?
The price of cryptocurrencies can be impacted by changes in CPI both favourably and unfavourably. Increased demand for bitcoin assets due to inflationary pressures from higher CPI statistics might result from investors looking for inflation hedges. In contrast, decreased demand and price volatility could result from deflationary pressures from lower CPI figures.
In the United States, inflation is anticipated to have dropped for the sixth consecutive month in December 2022, dropping to 6.5% (from 7.1% in November), the lowest level since October 2021. The CPI is anticipated to level out in the upcoming months after climbing for four straight months and by 0.1% in November.
Core inflation is anticipated to reach 5.7% yearly, the lowest level in a year, but is estimated to rise at a slightly faster rate of 0.3% each month as opposed to 0.2% in November.