Lower-than-expected inflation data sends a sudden rally in cryptocurrencies, while the US dollar is driving the price.
It regained $24,000, but failed to hit several-month highs on Aug.
BTC/USD 1-hour candlestick chart (Bitstamp). Source: TradingView
CPI cuts risky assets in a much-needed recession
Data from Cointelegraph Markets Pro and TradingView confirmed the roughly $1,000 hourly gain after July’s US Consumer Price Index (CPI) data showed a month-on-month slowdown.
While managing $24,179 on Bitstamp, BTC/USD has not gained enough momentum to challenge the previous day’s levels.
However, the relief among traders was palpable as low inflation should signal the Fed that it should raise interest rates less sharply in the future. This, in turn, should reduce the pressure on risky assets, including cryptocurrencies.
Annual CPI inflation came in at 8.5%, below the expectations of 0.2%, while the monthly figure remained unchanged compared to June.
“Markets now have a very clear path to regional Fed surveys in a few weeks. I would expect them to be much weaker,” said Raoul Pal, founder of Global Macro Investor.
“The highest inflation gives way to the highest growth fears. I think the markets will generally respond positively to weak growth, not negatively.”
Blockware’s principal analyst, William Clemente, was more cautious, describing the rally in risk assets as continuing “short-term” behind the pressure.
Meanwhile, belief in the Fed’s cooling cycle of rate hikes began almost immediately, as bets on a 75 basis point rate hike in September fell sharply in favor of 50 basis points.
Market commentator Holger Scheptz added: “The July CPI is optimistic, especially for tech stocks.”
Dollar drops step by step as Ethereum outperforms its best performer in several months
Meanwhile, Ether celebrated the CPI event more than Bitcoin
It saw its highest level since June 7th.
Related: Bitcoin Domination Hits 6-Month Low as Metric Announces New ‘Bottom Season’
At $1,847, ETH/USD is up 11.5% on the day, fueling hopes that the cryptocurrency’s rally may be more than just fake.
Trader and commentator Josh Rager tweeted: “Some of you are forgetting that the market can go up and it’s not really a trap. Especially if it’s fundamentally driven.”
ETH/USD 1-day candlestick chart (Binance). Source: TradingView
However, today’s net loser was the US dollar, which has continued the downward trend in CPI since mid-July.
According to popular trader Pierre, the US Dollar Index (DXY) has lost 1.3% and is now targeting its 100-day moving average.
Sven Henrich, founder of analytics firm NorthmanTrader, described DXY as a “shatter”.
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