Bitcoin Price Nears $100K as Inflation Data Fuels Optimism for Fed Rate Cuts

The latest inflation report has propelled Bitcoin to near-record highs, with the cryptocurrency briefly surpassing $99,000 on Wednesday.

The Consumer Price Index (CPI) revealed a 2.9% annual increase in December, fueling speculation about potential Federal Reserve rate cuts.

Inflation and Bitcoin’s Surge

The 2.9% inflation rate aligns with market expectations and suggests a continued decline from the 9.1% peak in 2022.

However, it remains above the Federal Reserve’s 2% target. Zach Pandl, Grayscale’s Head of Research, remarked that this inflation print revives hopes for monetary easing, which could benefit risk assets like Bitcoin.

Bitcoin’s price surged 1.9% immediately following the report, hitting $99,000 within 30 minutes. Ethereum and Solana also saw gains, rising to $3,300 and $192, respectively.

The Fed’s Easing Cycle

The Federal Reserve recently initiated its first rate cut in four years, reducing the benchmark rate by 50 basis points. While policymakers signal a cautious approach, traders are optimistic about further rate cuts in 2025.

Core inflation, excluding volatile food and energy prices, fell to 3.2%, its lowest since July. This reinforces the view that disinflation is taking hold, potentially paving the way for additional rate reductions.

Bitcoin’s Volatility and Market Sentiment

Despite hitting $108,000 last month, Bitcoin has faced significant volatility, with its price dipping below $90,000 earlier this week.

Analysts attribute this to shifting market expectations about Fed policy and broader economic conditions.

Lower interest rates generally support risk assets by reducing borrowing costs and encouraging spending. Bitcoin, often viewed as a hedge against inflation, stands to gain from a more accommodative monetary policy.

Looking Ahead

With the Federal Reserve’s next meeting approaching and core PCE data pending, market participants will closely watch for signs of further easing.

For now, Bitcoin’s resilience near $99,000 underscores its role as a key player in the evolving economic landscape.