Is Risk-on Trading Back? Crypto Notches Rare Rally

Bitcoin traded well above $18,000 through Thursday afternoon in New York, even approaching $19,000 by the afternoon

article-image

Wit Olszewski/Shutterstock.com modified by Blockworks

share

After a brief morning dip, bitcoin and ether bounced back by Thursday afternoon in New York as slowing inflation started to push traders back into risk assets.

Inflation rose 6.5% year-over-year in the 12 months ending in December, according to data from the Bureau of Labor Statistics released Thursday morning. Core inflation — which excludes volatile food and energy prices — rose 5.7% in December from the previous year, a decline from November’s 6% year-over-year showing. 

Bitcoin on the day held its price mooring well above the $18,000 level, approaching as much as $19,000 by the afternoon. Bitcoin and ether at points rallied 5.3% and 4%, respectively, in the hours after the CPI report’s release, the last before the Federal Reserve’s next meeting. 

The DeFi sector has jumped 13% alongside ether over the past five days, while BTC has popped 11% | Chart by David Canellis

“The recession is the focus for everyone, including the Fed, indicating slower demand,” said Rena Shah, head of operations and strategies at Trust Machines. “A slower-paced economy is needed to tame inflation, but it’ll come at a cost of short-term volatility. If inflation is moving downwards…we’d expect long-value positions with bitcoin retaining as that store of value asset.”

In terms of sustaining the rally, which for crypto tokens and equities has lasted all of 2023, so far, investors are expected to keep a close eye on the Fed’s next interest rate decision, slated for next month. 

Thursday’s report, largely in line with expectations on The Street, does not change much in terms of the overall inflation outlook, analysts from financial data provider Kalshi wrote in a note Thursday. Annual inflation at 3%, above the Fed’s 2% target, is still expected for 2023, they said. 

“The bigger change is in expectations of Federal Reserve behavior,” Kalshi’s note said. “By eliminating the upside risk from the January print, the probability of a 50 bp hike in the Fed’s next meeting has fallen from 25% to 9%.” 

By publication, CME Group was showing an even slimmer likelihood of a 50 basis point hike with only around 4% of the market calling for it, data shows

But even as the market confidently prices in a more confident gauge for where interest rates will fall, other analysts are skeptical to put too much emphasis on one reading. 

“Everyone, including the Fed, is just guessing,” Greg Foss, executive director of strategic initiatives at Validus Power Corp, said. “Monetary policy usually has a 12-month lag.”


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.png

Research

Pipe Network is a decentralized content delivery network (dCDN) that replaces the sparse, capital intensive data center footprint of traditional CDNs with a permissionless mesh of independent node operators. By orchestrating under-utilized resources that already exist at the edge, rather than purchasing or leasing thousands of servers, Pipe slashes capital intensity while letting supply expand autonomously in the places where bandwidth is scarcest and most expensive.

article-image

With Galaxy set to report earnings tomorrow, Rittenhouse Research rated it a strong buy in a recent note

article-image

A new quantum experiment shows that observation changes reality — but investors knew that already

article-image

Solana apps and app tokens could be in for a ‘mass repricing’

article-image

Company looks to bring tokenized equities “to meet the moment in this new regulatory environment,” CEO Brian Armstrong said

article-image

Musings on securities laws, plus Paul Atkins unveiling “Project Crypto” at the SEC

article-image

A spooky story about the importance of self-custody