Authored by Mary Liu, BitpushNews
During the early morning session on Wednesday, the US Department of Labor released the May Consumer Price Index (CPI) lower than expected, leading to a surge in the crypto market. The price of Bitcoin rebounded to over $70,000, but quickly fell back as the Federal Reserve announced no change in interest rates and hinted at only one rate cut this year. At the time of writing, the Bitcoin trading price stood at $68,250, with a 24-hour increase of 1.5%.
Altcoins showed positive performance, with most tokens in the top 200 by market cap experiencing price increases. The newer DePIN token Io.net (IO) performed the best with a 35% increase, followed by Livepeer (LPT) rising by 19.3%, and Injective (INJ) rising by 12.6%. Akash Network (AKT) experienced the largest decline, dropping by 10.5%, while FLOKI (FLOKI) and MANTRA (OM) both fell by 7.9% and 5.3% respectively.
The total market capitalization of cryptocurrencies currently stands at $2.48 trillion, with Bitcoin holding a market share of 54.1%.
Despite statements from Federal Reserve Chairman Jerome Powell, the US stock market largely ignored his remarks. By the close of Wednesday, the Dow Jones Industrial Average fell by 30 points or 0.09%, while the S&P 500 Index rose by 0.85% and the Nasdaq rose by 1.53%, setting new closing highs for the third consecutive trading day. Nvidia (NVDA.O) closed up by 3.5%, Apple (AAPL.O) rose by 2.86%, briefly reclaiming the title of the world’s most valuable company.
Powell’s speech hinted at a hawkish tone, suggesting that the Federal Reserve will maintain interest rates in the current range of 5.25% to 5.5%, with only one rate cut expected by 2024. He stated that the 2% inflation target has made “further progress.”
However, Powell expressed caution regarding a rate cut, stating that despite a slight decrease in inflation, there is not yet confidence in cutting rates. He emphasized, “We think today’s CPI report was progress and increases confidence. But we don’t think we’re at the stage where we have enough confidence to start easing policy.”
Furthermore, most Federal Reserve officials are not in a rush to cut rates. Former Federal Reserve official Laurence Meyer suggested, “The CPI data is good, and I think the Fed may cut rates in September. They will have three monthly economic reports before the mid-September meeting.”
Analysts suggest that given the moderate CPI, the Fed’s forecasts today may appear outdated, but this may reflect their reluctance to change predictions based on one set of data. Powell also noted that the inflation outlook provided by the Fed is “a fairly conservative forecast” and may not be confirmed by future data, requiring adjustments.
Analysts at Bitfinex suggest that while the Fed’s decision to maintain rates stable indicates caution towards inflation, the global trend is towards rate cuts, suggesting that a rate cut from the US central bank is only a matter of time.
They wrote, “Central banks around the world have started cutting rates, indicating an expansion of the trend towards monetary easing. Clearly, the Bank of England and the Federal Reserve will follow suit in the coming months. The global liquidity cycle suggests that the money supply may increase, supporting asset prices including cryptocurrencies.”
Short-term volatility may increase in the crypto market. Analysts state, “With the Fed’s decision to maintain current rates, Bitcoin (BTC) may experience short-term fluctuations as the market adjusts to the news. However, the overall trend may remain positive, especially if the overall economic outlook continues to improve.”
They point out, “Historically, three out of four CPI data releases have led to local highs in Bitcoin prices, indicating that such announcements may bring about volatility. With investors remaining optimistic about rate cuts later this year, Bitcoin may consolidate or experience mild increases around current levels.”
CEO of Ionic Digital, Matt Prusak, stated, “As the Fed aims for a soft landing, any substantial downturn in Bitcoin may present attractive accumulation opportunities for long-term investors.”
