Bitcoin holds above $63k after inflation rises as expected

The Federal Reserve’s preferred inflation gauge came in as expected Thursday, spurring a rebound in stock futures. Bitcoin and ether also extended their recent rally Thursday morning in New York.

January’s core personal consumer expenditures index, which excludes volatile food and energy prices, showed a 0.4% month-over-month increase. Prices are 2.8% higher than they were this time last year, which is still hotter than the Fed’s preferred 2% target, but slightly lower than December’s year-over-year figure of 2.9%.

“Obviously, an acceleration — even an expected one — is not great news, and could serve to push back even further any expectations of US rate cuts,” Noelle Acheson, author of the Crypto is Macro Now newsletter, said. “Already, the market is in line with the official Federal Reserve forecast of three rate cuts by the end of 2024, a sharp shift from its outlook just a month ago.”

Fed fund futures show a 78% likelihood of central bankers holding interest rates through May, with the first rate cut expected in June, according to data from CME Group.

Bitcoin (BTC) was back above $63,000 Thursday morning after hovering around $61,500 Wednesday. The largest cryptocurrency is up 23% over the past week and has already broken all time highs in some currencies, including the Australian dollar, according to data from CoinMarketCap.

Early on Thursday, ether (ETH) broke through $3,500 for the first time since April 2022. This extends a run that has seen the cryptocurrency gain 17% this week and more than 50% over the month.

The run up in crypto markets is thanks to a variety of tailwinds, analysts say, including ongoing interest in bitcoin spot ETFs and optimism about an ether spot product, favorable macroeconomic conditions and the upcoming bitcoin halving cycle, expected this April.

“The continuous value dilution of fiat currencies can only burnish the allure of hard assets, such as gold and bitcoin,” Acheson said. “And bear in mind that this dilution is the backdrop for bitcoin’s upcoming halving, which will shine a media spotlight on its […] hard supply cap and programmatic issuance reduction. The contrast could not be more obvious.”

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