Cryptocurrencies Soar as U.S. Inflation Data Fell Short of Forecasts
(MENAFN) Cryptocurrencies surged as the latest US inflation data came in lower than expected, heightening market optimism and driving risk appetite, particularly as expectations for a Federal Reserve rate cut in September soared.
The US Consumer Price Index (CPI) increased by 2.7% year-on-year in July, while labor market data released last week showed negative figures.
Money markets are now pricing in a 96% probability of a 25-basis-point rate reduction by the Federal Reserve in September. Meanwhile, Treasury Secretary Scott Bessent has suggested that the Fed should contemplate a more aggressive 50-basis-point cut.
These anticipated rate cuts are seen as a potential boost for the US economy, spurring riskier assets like cryptocurrencies. Bitcoin reached an all-time high of $124,000, while Ethereum spiked nearly 10%, surpassing $4,700. Some altcoins surged by as much as 20%, with the total cryptocurrency market cap climbing past $4 trillion.
Bora Erdamar, an economics researcher at Istanbul's Bahcesehir University, told Anadolu that cryptocurrencies are highly sensitive to macroeconomic factors. He explained that the growing expectations of a rate cut due to inflationary pressures are a key driver behind the price increase.
“It is a well-known fact that the Trump family and many people in his Cabinet are crypto investors - some even have companies in the sector - so the successive policies implemented to support the development of crypto markets and the support for further growth of cryptocurrencies are on the rise,” he said.
Erdamar also pointed out that Ethereum experienced a 50% gain in July. “Both Ethereum and Bitcoin reached their highest prices, led by purchases by US firms and pro-crypto regulations, while the rate cut estimates and new ETF approvals for altcoins will also help investors determine the price direction,” he added.
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