Bitcoin prices rose today as traders decided that the Genesis bankruptcy news was already assessed and unlikely to have a serious impact on BTC prices.
Bitcoin prices rose on Jan. 20, with the crypto’s market-wide rally leading some investors to hope that the year-long high of $21,427 marks
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The floor has arrived.
Despite negative news about crypto lender Genesis, the price of bitcoin continues to rise. The rise in bitcoin prices after Genesis filed for bankruptcy could mean that the news was already priced in BTC.
Equity markets continued to rise last week after a cooling of U.S. stocks.
Daily cryptocurrency market performance. Source: Coin360
The primary catalyst for this rally appears to be a positive CPI report released by the Bureau of Labor Statistics (BLS) on January 12 that shows a 0.1% decline in overall inflation for all urban consumers.
Inflation hit its lowest since April 2020. Equity traders are also reacting by raising prices that move south at the Feb. 1 meeting in anticipation of positive data making the Federal Reserve interest rate hike less aggressive.
Positive inflation figures have already caught the attention of the US Federal Reserve which has acted on its own to raise interest rates. Federal Reserve Governor Christopher Waller, on January 20, indicated where interest rates could go:
“Based on the data at hand at the moment, there appears to be little turbulence ahead, so I am currently in favor of a 25 basis point increase at the next FOMC meeting later this month.”
The stock market opened higher on Jan. 20, with the Dow Jones, S&P 500 and Nasdaq all posting positive numbers. As Cointelegraph reports, Bitcoin price action is closely linked to US equities and today’s rally is no exception to this trend.
Here are some of the reasons why the price of Bitcoin has increased today.
The positive CPI data is the reason for the new bitcoin price high of the year
On January 20, Bitcoin hit a yearly high of $21,427, and some analysts now see $21,000 as the new BTC price floor. While BTC trading volumes have not returned to levels prior to the FTX collapse, on January 15, $58.5 billion in bitcoin trading reached a new annual high.
Inflation fell for the sixth consecutive month in the CPI report. One of the biggest flaws in the report is the sharp drop in gasoline prices. Prices for used and new cars also fell. The CPI report warns that the cost of services and food has remained high.
If inflation peaks, the Federal Reserve is likely to be pivoted by aggressive interest rate hikes. Many traders agree that the price of BTC could rise if the Federal Reserve pivots towards its current policy of tightening quantities and increasing interest rates.
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The FOMC will begin meeting Jan. 31 and is expected to decide on interest rates the next day. Positive inflation data could influence the FOMC’s decision and push BTC and equities further. The U.S. bank’s disappointing Q4 2022 earnings report raised the market as investors await more details about the Fed’s potential decision.
According to market analysts, the long-term data favors bitcoin
Investor confidence in the crypto market could also rise as they believe that small-sized interest rate hikes from the US Federal Reserve throughout 2023. As the CPI report signals that the Fed strategy is working they can start working |.
The Fed’s statement opens up the possibility of a policy change, and inflation is tied:
“The committee anticipates that sustained growth in the target range would be appropriate to achieve a monetary policy position that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future growth in the target range, the committee will take into account the cumulative tightening in monetary policy, the lag with which monetary policy affects economic activity and inflation, and economic and financial development”.
According to CME Group, the derivatives market, whose global benchmark product estimates interest rates, shows a high probability of an increase in the near term that could be lower than previously estimated.
Interest rates could fall. Source: CME Group
The graph shows a possible slowdown in interest rate growth. Public sentiment reflects a belief that rates could be lower in the future and investors believe this has increased the chances of a broader recovery in the crypto market.
The cooling US dollar is good for bitcoin
Another positive sign for bitcoin prices is the cooling US dollar. Historically, when the DXY pulls back, sentiment towards Bitcoin and other risk assets increases.