Bitcoin surges! U.S. inflation cools, posting the biggest single-day gain in two months

Bitcoin rose more than 7.5% on Wednesday, breaking through $66,000, marking its biggest one-day gain in nearly two months.

The increase was triggered by U.S. Consumer Price Index (CPI) data which showed inflation slowed to 3.41% in April from 3.51% in the previous month.

Overall, the U.S. CPI fell year-on-year to 3.36% in April, compared with 3.48% in March. The U.S. inflation rate has remained above 3% for 37 consecutive months.

The US core CPI (excluding food/energy) fell year-on-year to 3.62%, down from 3.80% last month. This is the lowest core inflation rate since April 2021.

As inflation falls, markets are growing optimistic that the Federal Reserve may start cutting interest rates. Doing so would boost investor demand for risky assets like Bitcoin.

Bitcoin is continuing yesterday’s gains, trading up 5.7% at $66,239 at 6:08 a.m. ET.

Fed likely to cut rates as inflation eases

The Consumer Price Index (CPI) data for April changed market expectations for a Fed rate cut.

Data from the CME FedWatch Tool showed that 72% traders expect the Fed to cut interest rates at its September 2024 policy meeting.

In addition to the Fed, other central banks in developed economies are also reducing borrowing costs. In March, the Swiss National Bank became the first major central bank to cut interest rates after a period of monetary tightening.

If the central bank moves toward more rate cuts, market liquidity will improve and investors will feel more confident in diversifying their funds into riskier assets such as cryptocurrencies.

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