5 min readBitcoin rises from 77k yesterday back to 84k
- US CPI eased to 2.8% from 3% in January, bringing Fed rate cuts closer
- Trade war and recession worries remain, limiting the upside
- BTC dominance hits an almost YTD high
- Friday’s debt suspension could ease liquidity conditions
Bitcoin is rising for a second straight session, recovering from a 77k low yesterday, a level last seen in November, to 84k at the time of writing. Despite this rise, BTC trades down 14% across the past 7% and over 25% across the past month.
Bitcoin is rallying, along with risk assets such as U.S. stocks, following cooler-than-expected US inflation data. Inflation as measured by CPI cooled to 2.8% year on year, down from 3% and below forecasts of 2.9%. Underlying inflation also unexpectedly fell to 3.1% from 3.2%.
The battered crypto market is breathing a sigh of relief after falling over 25% over the past few weeks; hotter inflation could have quickly accelerated the selloff. Instead, the cooler-than-forecast inflation means the Federal Reserve is a step closer to cutting interest rates again after pausing its rate-cutting cycle at the start of the year.
With trade tariff wars kicking off and recession fears looming, at least the Fed has more flexibility than initially thought to step in and support a weaker economy if needed. The market is pricing in three rate cuts from the Fed this year. A lower interest rate environment can be supportive of risk assets if the economy isn’t heading into a recession.
BTC dominance reaches an almost YTD high
While today’s inflation data brings some relief, trade war and recession fears loom and will likely limit the upside of risk assets, including crypto and US equities. The risk-off mood is still in the air as the divergence between Bitcoin and the broader crypto market grows. Bitcoin dominance has risen to 62%, an almost year-to-date high, while the ETH to BTC ratio has plunged to its lowest level since December 2020.
What now?
With US inflation data in the rearview mirror, the next significant price catalyst could come as soon as Friday, when the US debt suspension period ends. This could result in an injection of liquidity into the markets, driving a rebound.
The US Treasury hit the $36 trillion debt ceiling on January 21st, a day after President Trump’s inauguration. A debt issuance suspension period started, lasting until Friday, March 14. During this two-month debt suspension, BTC has fallen over 20%. Improved liquidity as the government resumes spending could bring some relief to crypto and stocks alike. That said, macro concerns over trade wars, slowing growth and interest rates remain unresolved and could limit any upside.
The liquidity surge could help drive demand, at least in the short term. However, the long-term outlook is closely tied to institutional investment, ETF inflows, and regulatory clarity.
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