Inflation Eases but Bitcoin Shows Minimal Response

Consumer price growth in the United States showed signs of slowing down in May, with the annual rate dropping from 4.9% to 4%, falling below the predicted 4.1%. This news had a minimal impact on the price of Bitcoin, which briefly reached $26,400, recording a daily growth rate of 1.7%.

On a monthly basis, prices increased by 0.1% in May, compared to 0.4% in April, aligning with economists’ expectations. The growth in core inflation, which excludes food and energy prices, stood at 5.3% annually and 0.4% monthly, slightly lower than the previous figures of 5.5% and 0.4%, respectively. Analysts had anticipated a yearly growth rate of 5.2% and a monthly rate of 0.4%

The release of the mixed data from the US Federal Bureau of Labor Statistics (BLS) triggered varied reactions from investors. Although global markets initially showed an increase in risk appetite, the upward trend was short-lived. While stocks attempted to extend the previous day’s rally, Bitcoin retraced its gains, experiencing a daily growth rate of just 1%. Ethereum also faced a setback, briefly testing the $1,770 level. Among the top 10 cryptocurrencies by market capitalization, all experienced declines ranging from 0.6% (Tron) to 4.5% (XRP) within the last hour, according to CoinGecko.

The publication of the BLS data eased concerns about a potential interest rate hike during the Federal Reserve’s meeting on June 13-14. The probability of such a hike decreased from 79.1% the previous day to the current 95.3%, as indicated by the futures market. The upcoming consumer price index report in July is expected to play a crucial role in the Fed’s decision-making process. While Fed Chairman Jerome Powell and his colleagues have signaled a preference for skipping a rate increase in June, they have left room for future tightening measures if necessary, as reported by Bloomberg.

Although the possibility of policy tightening in the following month remained relatively unchanged, with odds standing at two against one (74%), the likelihood of a rate cut to 4.75-5% from the current 5-5.25% increased to 36.4% compared to 30.3% the day before. Some market experts, like Michael Cramer, founder of Mott Capital Management, have even suggested that the price of Bitcoin could drop to levels near $20,000. Furthermore, the future of digital assets may depend on the outcome of the SEC litigation against major cryptocurrency exchanges Binance and Coinbase, according to former CFTC Chairman Timothy Massad.