Bitcoin regained its footing above $22,000 despite January’s U.S. consumer price index (CPI) data coming in line with economist forecasts. The largest cryptocurrency by market capitalization was recently trading over $22,200, a more than 3% gain in the past 24 hours. The CPI rose 0.5% versus 0.1% a month earlier, and on a year-over-year basis inflation ran hotter than expected at 6.4%, with core CPI coming in at 5.6%. Despite investor concerns about stablecoin regulation and U.S. central bank inflation-fighting measures, Bitcoin has been able to maintain its position above $22,000.
The Federal Reserve is expected to remain hawkish with more interest rate hikes in the near future, according to data from the CME FedWatch tool. This news caused a significant reaction in the markets, with Bitcoin (BTC) initially dropping before quickly surging by $700 to trade as high as $22,300. Investors are now watching to see what the Federal Open Market Committee (FOMC) will decide at their upcoming meeting in March, with the majority of traders expecting a 25 basis point rate hike.
Cryptocurrencies have seen a surge in prices today, with Bitcoin (BTC) up 3.7% and Ether (ETH) up 5%. This follows a period of downward pressure due to regulation and contagion risks. Edward Moya, senior market analyst for foreign exchange market maker Oanda, believes that the market may be pricing in more Federal Reserve tightening, but that this is not having a major impact on crypto prices. The CoinDesk Market Index, which measures the overall crypto market performance, is currently up 3.7%.
Equities markets were mixed on Tuesday, with the S&P 500 index rising 0.1% and the Dow Jones Industrial Average (DJIA) down 0.2%. The tech-heavy Nasdaq Composite was up 0.6%. Joe DiPasquale, CEO of crypto fund manager BitBull Capital, said he wouldn’t be surprised to see post-CPI-release gains in Bitcoin (BTC) and Ethereum (ETH) dissipate by the end of this week. DiPasquale highlighted that crypto prices have typically risen after past CPI releases in the past, only to fall in the days after. He said he will be looking for BTC and ETH to test $20,000 and $1,250, respectively.
Crypto markets have seen a shift in sentiment, with regulation now trumping inflation concerns. On Tuesday, the Consumer Price Index (CPI) print was lower than expected, yet the reaction in crypto markets was relatively muted, with only a few hundred dollars on each side. According to managing partner at quantitative trading firm Dexterity Capital, Michael Safai, this is because regulation is now the bigger influence on sentiment in crypto markets. Managing partner at STORM Partners, Sheraz Ahmed, noted that this was one of the calmest CPI days in recent months, and that markets may become more unpredictable as a result.
