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Bitcoin rose past $100,000 amid a renewal in the risk rally, tracking the best CPI day on Wall Street since at least 2023.
After demand for risky assets, from cryptos to stocks, was rekindled by softer-than-expected US inflation, Bitcoin surged beyond $100,000 again on recalibration of Fed rate cut bets.
For the last four weeks, the initial digital asset's price has fluctuated between $90,000 and $100,000. On Wednesday, the token's value increased by 3.9% to $100,222. About $8,000 down from its all-time high on December 17, it last hit $100,000 on January 7.
The equity market's reaction to US inflation data on Wednesday set a positive tone for digital tokens, and the correlation between Bitcoin and Nasdaq, a gauge of US technology companies, reached a two-year high.
According to Bloomberg data, the OG token and the Nasdaq 100 Index have a 30-day correlation coefficient of about 0.70. If the value is 1, the assets are moving in lockstep, and if it is -1, the assets are moving in inverse tie.
Bitcoin & Nasdaq Are Tied at the Hip
According to the latest US inflation report, consumer price increases of 2.9% year over year were in line with forecasts, while core inflation of 0.2% month over month was lower than expected.
That marked the first step down in the core rate in six months.
Cheaper hotel stays, a smaller advance in medical care services, and relatively tame rent increases helped to restrain the December figure.
Easing inflation helps re-establish the discourse that progress in price pressures has restarted after months of higher prints.
However, Fed members will still need a string of modest readings to be convinced. Bond yields have surged significantly due to persistent inflation and worries that the Fed eased too hastily late last year.
Policymakers are still anticipated to keep rates steady at their meeting later this month.
That is largely due to last week's good jobs data and other factors.
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However, several analysts suggest that the news could potentially lead to a Fed rate cut in March.
Before inflation data, traders expected a further cut only in the second half of the year.
John Williams, president of the Federal Reserve Bank of New York, expressed optimism that inflation will keep falling but provided no clues as to when more cuts would be implemented.
New data suggest ongoing success in reducing inflation, according to his Richmond colleague Tom Barkin, who argued that rates should stay conservative. The Chicago Fed's president, Austan Goolsbee, used the numbers to back up his prediction that pricing pressures will be eased.
Despite a strong US economy and doubts about the effects of Trump's policies, markets were worried about the Fed's ability to cut interest rates further.
Concerted Cross-Asset Rally
The core price index's softening boosted stocks and cryptocurrencies.
Following the release of the inflation report, the Nasdaq 100 and the S&P 500 indices rose, providing relief to Wall Street and bolstering speculation that the Fed will continue to cut rates this year.
Wall Street stocks recovered their 2025 losses, with the S&P 500 marking its biggest rise since the US election's aftermath, a 2% surge.
Fears that a 5% rate could be imminent were allayed when a rise in Treasuries drove 10-year rates down by about 15 basis points.
Energy prices soared, with a barrel of oil reaching over $80.
Bloomberg data shows that the combined cross-asset rise was the highest for an index day of consumer prices since late 2023.
As risk-takers reemerged, the market's "fear gauge" — the VIX index — marked its biggest decline this year.
Trump Trade For Cryptos?
On January 20, President-elect Trump will take the oath of office and then launch a reform initiative.
Investors are considering his promise to establish the United States as the world's leading cryptocurrency hub about the potential inflationary effects of tariff and immigration policies.
Many expect Trump trade momentum to build up in the days ahead of the president-elect's inauguration.
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