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

Yuichiro Chino/Getty Images

  • Bitcoin jumped 15% to $26,500 shortly after the CPI was released, hitting a nine-month high.
  • Cryptos are up across the board as the market sits at a $1.1 trillion value, per Messari.
  • Ethereum is also on a tear, surging 7.5% in the past 24 hours.

Bitcoin jumped to a nearly nine-month high on Tuesday as traders mulled over key inflation data that could bolster odds the Federal Reserve will slow interest rate hikes. 

The rally follows the release of the consumer price index, which was in line with estimates to show continued cooling in inflation. The CPI rose 0.4% in February from January and was up 6% annually.

Bitcoin soared to $26,500 shortly after the print, surging over 15%. Bitcoin later pared some gains, according to Messari, trading up about 6%.

Although bitcoin is leading the rebound, crypto markets are notching gains across the board, with the industry's value sitting above $1.1 trillion. Ethereum is also on a tear, jumping 7.5% in the past 24 hours.

Traders are speculating on the Fed's next move on monetary tightening as the highly-anticipated FOMC meeting is set to kick off next week. The latest CPI reading solidified expectations that policymakers will increase rates by another 25 basis points and then pause afterward.

That compares with previous speculation that the Fed could hike by 50 basis points with more to follow. But the recent collapses of Silicon Valley Bank, Signature Bank, and Silvergate Capital have since raised hopes for a smaller hike.

While federal regulators are stepping in to backstop depositors at SVB and Signature, the earlier fear that they could lose some of their money may have given crypto a boost. 

"Silicon Valley Bank meltdown has directed a lot of attention on the permissionless and autonomous nature of Bitcoin for storing savings. Combined with a low CPI print, the price of bitcoin is pulling retail into the crypto economy again," Enrico Rubboli, the CEO of blockchain scaling provider Mintlayer, told Insider. 

"Confidence in the banking sector has been eroding among some investors who could find themselves moving toward alternative assets like bitcoin, which has strongly benefitted during this crisis," Ahmed Negm, Head of Market Research at multi-asset brokerage MENA at XS.com, shared in a statement with Insider.

Negm added: "Cryptocurrencies in general could see positive performances while interest rate expectations softened compared to last week."

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