Bitcoin (BTC) experienced a rally, reaching $66,190 and gaining over 7.5% in the past 24 hours. This surge was in response to the release of the US Consumer Price Index (CPI) data, which has implications for potential interest rate cuts in 2024.
According to the US Bureau of Labor Statistics (BLS), the Consumer Price Index for April came in at 0.3%, which is lower than the expected rate of 0.4%. The March CPI print was 0.4%, which saw a lower rate of increase for the last twelve months ending April for the index, coming in at 3.4%. Rising shelter and gasoline costs were the main contributors, responsible for “over seventy percent of the monthly increase in the index for all items.”
Market participants immediately began discussing the possibility of interest rate cuts by the Federal Reserve. Currently, traders are betting on a June rate cut probability of just 3.1%. The market anticipates that the first possible rate cut would occur in September, with a 53% probability, according to the CME’s FedWatch tool.
But how do rate cuts affect crypto prices?
Positive inflows into spot Bitcoin ETFs have also played a role in boosting investor sentiment. On May 15, U.S. spot Bitcoin ETFs recorded a net inflow of over $153 million, with Bitwise’s BITB leading the way, according to Farside Investors. Grayscale’s Bitcoin Trust (GBTC), which has typically experienced outflows, surprisingly saw an inflow of $27 million. This comes after weeks of net outflows from spot Bitcoin ETFs, coinciding with the decline in Bitcoin’s price from its all-time high of $73,750, reached on March 14. Further institutional appetite for Bitcoin investment products continues to grow, as evidenced by the State of Wisconsin Investment Board's disclosure of holding approximately $164 million in spot Bitcoin ETFs.