Recent US inflation data has sparked a wave of optimism in the Bitcoin and wider cryptocurrency markets. In January, the Personal Consumption Expenditures (PCE) inflation rate, which is favored by the Federal Reserve, decreased to 2.5%, aligning exactly with expectations. Meanwhile, core PCE inflation was reported at 2.6%, also meeting forecasts, marking the first time PCE inflation has declined since September 2024.
Bitcoin And Altcoins Experience Relief Following Inflation Data
The latest results indicate a consistent performance both year-over-year and month-over-month. The headline PCE remained at 2.5% YoY, while core PCE was revised down from an earlier estimate of 2.8% (and even 2.9% in prior revisions) to 2.6%, reflecting a 30 basis point improvement. This core headline figure is the lowest YoY since August 2024 and is significant as it represents the first slowdown in headline PCE YoY after four months. These statistics imply that diminishing inflationary pressures may be slowly altering market sentiment.
Crypto analyst BACH (@CyclesWithBach) responded quickly on X, highlighting the positive implications of the data. He pointed out that “this core headline number is the lowest reading YoY since August 2024” and noted the 30bp revision as a noteworthy advancement. While cautioning against excessive optimism, he remarked: “This is a BIG difference and is indeed bullish for markets! We might still encounter some tumultuous bottoming patterns, but this bull market isn’t finished yet! — Credit spreads, despite all this, remain narrow, indicating that credit markets perceive no risk!”
Following the release of the data, Bitcoin bounced back above $84,000, marking a 3.5% increase since the report and approximately 7.5% from today’s low of $78,258. After experiencing an 18% decline over the past week, which saw it plummet from $96,000, this rebound signifies a clear recovery. Altcoins also saw gains; Ethereum rose by 5.8%, XRP increased by 9.2%, and Solana surged by 16%.
Significantly, SOL’s rally coincides with the announcement that the CME Group will introduce Solana (SOL) futures on March 17, pending regulatory review from the CFTC.
Crypto analyst Kevin (@Kev_Capital_TA) also shared his thoughts on the ramifications of the PCE report, stating that “Fed CME interest rate Futures currently show a 53.7% probability of a rate cut in June following the PCE Report, up from below 50%. This is promising news. #BTC #Altcoins #Crypto”
Wider Macro Perspective
In addition to the PCE data, overarching macroeconomic signals could further bolster market recovery. Julien Bittel, Head of Macro Research at Global Macro Investor (GMI), provided his insights on X, attributing today’s market volatility, particularly in crypto, to the tightening of financial conditions in Q4 of the previous year, which reduced liquidity and curtailed economic surprises.
Bittel proposes that these conditions are beginning to reverse: “Financial conditions have been improving rapidly over the past two months – with the dollar down, bond yields down, and oil down – creating a favorable setting for recovery in upcoming data.” He also observed that Bitcoin’s price now fully encapsulates the impact of recent tightening, and with an RSI level of 23—the most oversold since August 2023—he advised, “be greedy when others are fearful.”
As of now, BTC is trading at $83,804.
