Bitcoin notches 9-month high after inflation data bolsters speculation of smaller rate hike

Bitcoin rose to nearly nine months high Tuesday after traders looked at key inflation data, which could increase the odds that the Federal Reserve will slow down interest rate increases.

This rally comes after the release of the consumer prices index. It was in line to estimates that inflation would continue to cool. The CPI increased 0.4% in February over January, and was up 6% annually.

Shortly after printing, Bitcoin surged to $26,500 and soared over 15%. Messari said that Bitcoin lost some of its gains and trading was down 6%.

While bitcoin is the leader of the rebound, crypto markets are seeing gains all over the place, with the industry’s total value at $1.1 trillion. Ethereum has also seen a surge, rising 7.5% over the last 24 hours.

Traders speculate on the Fed’s next move in monetary tightening, as the eagerly awaited FOMC meeting will kick off next week. Expectations that policymakers will raise rates another 25 basis points, and then pause, were confirmed by the latest CPI reading.

This compares to previous speculation that the Fed might raise its rate by 50 basis points, with additional increases expected. However, the recent collapses at Silicon Valley Bank, Signature Bank and Silvergate Capital have raised hopes for a smaller increase.

Federal regulators have stepped in to support depositors at Signature and SVB, but the fear that they might lose some of their funds may have given crypto a boost.

“Silicon Valley Bank’s meltdown has focused a lot attention on Bitcoin’s permissionless, autonomous nature for saving money. Mintlayer CEO Enrico Rubboli said that bitcoin’s price is increasing due to a low CPI print and that retail is being drawn back into the crypto economy.

‘Confidence within the banking sector is eroding among some investment who could find themselves shifting toward alternative assets such as bitcoin, which has greatly benefitted during this crisis,” Ahmed Negm (Head of Market Research at multiasset brokerage MENA.com), stated in a statement to Insider.

Negm said that Cryptocurrencies could have positive performances, while interest rates expectations are less than last week.