The largest cryptocurrency, Bitcoin, surged by as much as 4.1% to reach $70,002 amid signs of cooling inflation, which bolstered expectations that the Federal Reserve may cut rates this year. Smaller cryptocurrencies, including Ether, Solana, and Dogecoin, also experienced significant rallies.
“FalconX saw significant buying through both the spot and derivatives desks during the 3+% sell-off yesterday,” said Ravi Doshi, head of market at prime broker FalconX. “Those bets paid off.”
The rally extended to shares of crypto-related companies, with Coinbase Global Inc. rising 7.4% and Bitcoin proxy MicroStrategy Inc. climbing 6.2%.
Bitcoin had previously hit a record high of $73,798 in mid-March, driven by inflows into dedicated U.S. exchange-traded funds. However, it struggled to reach new highs over the past three months amid shifting rate expectations.
Recent data from the Bureau of Labor Statistics showed that the core consumer price index (CPI), which excludes food and energy costs, climbed 0.2% from April. The year-over-year measure rose 3.4%, marking the slowest pace in over three years.
“This data sets the Fed up nicely for rate cuts as early as July,” added Doshi.
During Tuesday’s policy meeting, Fed officials indicated they now expect to cut rates only once this year, a reduction from the three cuts forecasted in March, according to the median projection.
“Crypto is a mature asset class now, and similar to broader markets, we should expect upticks when indicators like the CPI suggest interest rate cuts may occur in the not-so-distant future,” said Michael Safai, co-founder of quantitative trading firm Dexterity Capital.
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