Bitcoin Breaks $28K as Positive U.S. CPI Pushes Crypto Market

The latest CPI figures have caused Bitcoin and crypto to surge, due to their implications for Federal Reserve policy.

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  • The recent slowdown in inflation triggered a surge in the crypto market. 
  • Bitcoin broke the $28,000 mark, and Ethereum followed closely.
  • Despite lower food prices, core inflation remains high.

As the US economic landscape shifts, crypto traders keenly observe the Consumer Price Index (CPI). This key inflation figure has major implications for Federal Reserve policy, impacting the entire crypto market. 

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In April, inflation slowed for the tenth straight month, according to the data the Bureau of Labor Statistics released on Wednesday, May 10. 

Bitcoin Breaks $28k on CPI Figures

The news of a slowdown in inflation created positive momentum in the crypto markets. Bitcoin, often a leading indicator for the crypto market, broke the $28,000 mark on this news. 

This bullish trend wasn’t confined to Bitcoin alone. Many major tokens experienced a surge, painting the market green over the past 24 hours. Ethereum, the second-largest crypto market cap, rose past $1880, following Bitcoin’s lead closely.

The market reaction is likely due to the connection between inflation figures and Federal Reserve policy. Specifically, when inflation is high, the Fed has to rein it in by raising interest rates. However, higher interest rates cause a fall in the value of risk assets, which include crypto. 

Core Inflation Still High

This slowdown in CPI inflation is mainly due to a drop in grocery costs that offset the rising gasoline prices. Despite that, an underlying inflation measure, known as core inflation, remained high. 

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Core CPI, which excludes volatile food and energy items, increased 0.4% from March, mirroring a similar rise the previous month. As a result, the annual inflation figures lowered only slightly, from 5.6% to 5.5%.

The overall consumer prices rose by 4.9% from a year earlier, marking a decrease from 5% in March and a significant drop from a 40-year high of 9.1% last June. On a monthly basis, prices rose by 0.4% following a 0.1% increase in March. This year-on-year increase is the smallest since April 2021.

On the Flipside

  • Bitcoin maximalists argue that the BTC is a store of value and a hedge against inflation. However, the markets still treat Bitcoin as a risk asset, making it highly correlated with other cryptos. 
  • The Fed recently approved a 25 basis points increase, raising the Federal Funds rate to its highest level in 16 years. 

Why You Should Care

Macroeconomic decisions have significant implications for the crypto markets, just as they do for the traditional markets. Interest rates and the cost of borrowing have a substantial impact on the overall crypto market capitalization

Read more about how the latest rate hikes impact the crypto market: 

Here’s How the Fed’s Latest Rate Hike Will Impact Crypto

Read about the latest developments in the first crypto insider trading case: 

Coinbase Exec Convicted in Crypto’s First U.S. Insider Trading Case

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
David Marsanic

David Marsanic is a journalist for DailyCoin who covers the intersection of crypto, traditional finance, and government. He focuses on institutionalized crypto entities like major cryptocurrency exchanges and Solana, breaking down complex topics into easy-to-understand writing. David's prior experience as a business journalist at various crypto and traditional news sites has enabled him to maintain a critical approach to news while adhering to high journalistic integrity standards.