Lower-than-expected inflation data causes an immediate recovery in cryptocurrencies as the US dollar pays the price.
Bitcoin (BTC) declined around $24,000 but failed to make fresh multi-month highs on Aug. 10 as US inflation appears to be slowing.
Hourly candlestick chart BTC/USD (Bitstamp). Source: Trade View
The CPI alleviates the much-needed shortage of risky assets
Data from Cointelegraph Markets Pro and TradingView confirmed an hourly gain of around $1,000 after US Consumer Price Index (CPI) data for July showed a month-on-month slowdown.
However, managing $24,179 on Bitstamp, BTC/USD failed to gain enough momentum to challenge previous day’s levels.
Still, relief was felt among traders as lower inflation should signal the Federal Reserve that a less aggressive rate hike is needed going forward. This, in turn, should ease the pressure on risky assets, including cryptocurrencies.
On a yearly basis, CPI inflation came in at 8.5%, 0.2% below expectations, while the monthly figure was flat from June.
“Now the markets have a pretty clear timeline leading up to the Fed’s regional surveys in about a couple of weeks. I expect them to be significantly weaker,” said Raul Pal, founder of Global Macro Investor.
“Peak inflation is giving way to fears of peak growth. I do think that the markets will react positively to weak growth and not generally negatively.”
Lead Blockware analyst William Clemente was more cautious, describing the rise in risky assets as sustained “short-term.”
Meanwhile, belief that the Fed would ease its aggressive cycle of rate hikes ended almost immediately as rate hikes fell sharply to 50 basis points from 75 basis points in September.
“July CPI is bullish, especially for technology stocks,” added market watcher Holger Zschepitz.
Dollar falls in lockstep as Ethereum hits multi-month record
Meanwhile, Ether (ETH) was the bigger event than Bitcoin CPI, benefiting from sentiment and posting its highest level since June 7th.
Related: Bitcoin dominance hits 6-month low as metric announces new ‘alternative season’
At $1,847, ETH/USD is up 11.5% on the day, raising hopes that the crypto rally could be more than fake.
“Some of you forget that the market can pump up and it’s not really a trap. Especially when it’s foundation based,” tweeted trader and commentator Josh Rager.
ETH/USD 1-day candlestick chart (Binance). Source: Trade View
However, the clear loser on the day was the US dollar, which has continued its downward trend in the consumer price index since mid-July.
According to popular trader Pierre, the US Dollar Index (DXY) is down 1.3% and is now targeting the 100-day moving average.
Sven Henrich, founder of analytics firm NorthmanTrader, called DXY “crushed.”
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