Bitcoin rises to $66,000 after weak inflation in the US

US consumer price data was released on Monday, May 15, with the CPI, the main measure of US inflation, rising less than expected in April, up 0.3% from March. This is the first time in 6 months.

This number indicates a downward trend in inflation. This raises hopes for future interest rate cuts by the Fed.

Cryptocurrency market rebounds as US inflation slows, but will it last?

However, Fed officials need more information before considering a rate cut. On Tuesday, Federal Reserve Chairman Jerome Powell said the central bank “needs to be patient and let tight policy work. Moreover, some policymakers do not expect a rate cut this year.”

Percent Change in US Consumer Price Index (April 2023 - April 2024) Source: US Bureau of Labor Statistics.
However, inflation news has fueled optimism in financial markets. Including cryptocurrencies, the price of Bitcoin (BTC) rose from $62,000 to $66,000, an increase of approximately 7% in 24 hours.

Major altcoins also made significant gains, with Ethereum (ETH) and Solana (SOL) rising by 4.4% and 12.3% respectively, thus expanding the market capitalization of all cryptocurrencies by 6.7%, reaching 2.5%. According to Quinn Gekko.

Analysts believe that there are various factors in addition to easing the inflation rate in the United States. CryptoQuant analysts believe that “low selling pressure” is contributing to the situation.

Short-term Bitcoin holders realize the price and P/L Short-term Bitcoin holders realize the price and P/L Source: CryptoQuant
“A decline in selling pressure is evident among short-term Bitcoin holders who are selling at zero profits. Traders have been missing out on unrealized profits over the past few months. Furthermore, Bitcoin balances held by OTC holders have stabilized, indicating that there are fewer Bitcoin Bitcoin entering the market for sale through these entities. Investors said

However, demand growth must accelerate for the rally to be sustainable. This comes despite signs of increased demand from long-term bondholders and large investors. Additionally, CryptoQuant analysts noted that spot purchases of Bitcoin exchange-traded funds (ETFs) remain modest and that stablecoin liquidity growth has not improved.

In addition, the price of Bitcoin is still undervalued from the perspective of miner profitability, after the Bitcoin halving in late April 2024, miner revenues were halved. This puts financial pressure on them. Historically, the profitability of miners has been very low. It is often associated with the lowest price, indicating future growth potential.

Overall, analysts and industry experts remain optimistic about Bitcoin's long-term trend as the cryptocurrency market continues to develop. Macroeconomic conditions, regulatory developments and political factors will play a major role in determining the future.

Source: BeanCrypto

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