Bitcoin briefly touched $100,000 on Wednesday following a report showing signs of cooling U.S. inflation. This rise came amid growing optimism for risk assets, as the December Consumer Price Index (CPI) showed core inflation slowing to 3.2% year-over-year, down from 3.3% in November. The headline CPI held steady at 2.9%, marking a decrease in the core CPI for the first time since July. The new data fueled expectations that the Federal Reserve might take a more dovish approach to interest rates.
Bitcoin's price surged to $100,715 during afternoon trading, and by the end of the day, it settled at $99,493. Over the previous two days, the cryptocurrency had gained 7%. Alongside Bitcoin, Ether and Solana also saw strong performances, rising past $3,400 and $200, respectively. Analysts, including 21Shares crypto research strategist Matt Mena, pointed to the cooling inflation as a key factor behind the rally. According to Mena, the latest CPI data removed a major economic barrier, setting the stage for a potential pivot by the Federal Reserve.
Interest rate futures traders are now anticipating rate cuts in 2025, with many expecting the Fed to hold rates steady until June before possibly lowering them further. This has created a more favorable environment for risk-sensitive assets like Bitcoin. The rally has also been linked to technical factors, including key resistance levels in the equities market, such as the S&P 500 nearing 5,935.02.
Bitcoin's correlation with traditional financial markets has increased, particularly with the Nasdaq 100. Jag Kooner, Head of Derivatives at Bitfinex, noted that Bitcoin's sensitivity to macroeconomic trends is rising, with its correlation to the Nasdaq 100 at a two-year high. Bitcoin’s price movements now appear more closely tied to shifts in broader financial markets.
Furthermore, the rise in Bitcoin futures funding rates and a surge in short liquidations indicate a stronger market sentiment. Data from Coinglass revealed that out of over $263 million in liquidated positions across cryptocurrencies, $169 million were from short liquidations, with Bitcoin accounting for over $63 million of that total.
The overall cryptocurrency market also saw a broader rally, with the CoinDesk 20 index gaining 7% and stocks of crypto-related companies, such as Coinbase and MicroStrategy, seeing gains of 7% and 5%, respectively. While Bitcoin’s price briefly dipped below $90,000 earlier this week, the latest inflation data, alongside growing momentum in both equities and crypto markets, helped push the cryptocurrency back above the $100,000 mark.
