Bitcoin and the overall crypto market have weathered strong US inflation data that has rattled global markets by dampening hopes for quick interest rate cuts.
An analyst at economic data firm Truflation said that risky assets such as Bitcoin are doing well, after the cryptocurrency suffered moderate losses on Tuesday in the wake of the US inflation report that dampened hopes for a Federal Reserve interest rate cut.
Bitcoin fell from $50,000 to around $48,800 after the US CPI number saw traders push back the timing of the first interest rate cut to July. However, the decline was short-lived, as the digital asset is trading at $49,700 at the time of publishing this report, a slight decline of 0.8% in the last 24 hours, as the popular digital currency floats near the highest level in more than two years and prices have not changed much. Since the publication of inflation figures that came in higher than expected on Tuesday.
At the same time, the second largest digital currency in terms of market value stabilizes at the level of $2,651, without any increase or decrease in the last 24 hours, after achieving increases of more than 12% in the last 7 days.
In contrast, the S&P 500 fell 1.4%, while gold fell and bond yields rose as traders retreated from their expectations of an interest rate cut by the Federal Reserve before July.
Bitcoin has shown impressive resilience despite an overnight deterioration in risk sentiment, Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note.
Sector-specific factors have been supportive of Bitcoin, including the debut of US exchange-traded funds dedicated to the digital currency. The group of funds from the likes of BlackRock and Fidelity has attracted a net $3.3 billion since trading began on January 11.
Meanwhile, the so-called Bitcoin halving scheduled for April will limit the supply of the largest digital assets, a development seen by many as a price support based on historical precedents.
“We expect the market to pause briefly at these levels after a stunning four-month rally, before the Bitcoin halving event dominates market movements,” said Caroline Morrone, co-founder of digital asset liquidity provider Orbit Markets.
Bitcoin has tripled since the start of last year in a comeback from the digital asset's 2022 rout. Bets in the options market suggest traders are targeting prices beyond the record of around $69,000 set in November 2021.
Oliver Rust, of Truflation, said: While we saw a slight pullback in Bitcoin on the back of the news, overall, risk assets appear to be behaving as if a March rate cut is still on the table, although the majority... Most market participants do not expect this.
Rost continued: Until we see a decline in economic data, interest rate cuts will likely remain off the table until May or June. But markets may have simply accepted the fact that higher interest rates for longer are here to stay and have learned to live with this new reality now.
