Bitcoin prices have been under pressure through 2022 following the collapse of algorithmic stablecoin terraUSD and subsequent bankruptcy filings by lender Celsius and hedge fund Three Arrows Capital.
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Cryptocurrency prices edged up on Wednesday following the release of the April consumer price index report.
bitcoin Bitcoin rose nearly 2 percent to $28,174.29 after a steep start to the week, according to data from Coin Metrics. It was still down about 4.5% for the week. ether It rose more than 1 percent to $1,873.52.
Investors turned upbeat after a CPI report showed inflation fell to 4.9% year-on-year in April, slightly below expectations in a Dow Jones poll of economists.
“When it comes to inflation data, Bitcoin is looking at its status as a riskier asset,” said Callie Cox, an analyst at investment firm eToro. Bitcoin outperformed the S&P 500 five days out of 2019 — and with today’s gains, it’s on track to outperform the S&P 500 six out of seven days.”
“Inflation is coming down, as the Fed intends, which eases concerns about the future of the economy,” she added. “Lower inflation also supports the case for ending rate hikes, which were the reason the crypto winter started more than a year ago.”
Steven Lubka, managing director at Swan Bitcoin, said the CPI’s fall below economists’ forecasts further cemented market expectations that a pause in rate hikes and a rate cut would come sometime this year.
“Ultimately, this represents an easing of liquidity strains, an environment in which bitcoin has historically performed very well,” he said.
Bitcoin’s correlation with the S&P 500 surged to all-time highs in 2022 as the Fed hiked rates throughout the year. The price of the flagship cryptocurrency will drop by 65% in 2022.
However, the link to stocks has declined this year. At the same time, the price of Bitcoin and its correlation with gold has improved. Cryptocurrencies have also found inflation and other catalysts beyond the Fed — namely, a regional banking crisis and a regulatory crackdown in the U.S. Most recently, market participants have focused on Ordinals, a protocol that enables storing and Transactions are made possible on the Bitcoin blockchain and memecoin.