Bitcoin (BTC) reached a nine-month high on Tuesday, with four-day gains exceeding 30%. BTC has shrugged off the chaos on global markets following the collapse of Silicon Valley Bank last week and ridden expectations that U.S. interest rates will not rise as quickly.
Bitcoin climbed 9.6% to $26,533, its highest level since June 2022, on its fourth consecutive day of gains. The increase coincides with the release of the latest Consumer Price Index (CPI) data for February 2023 by the United States Department of Labor.
The United States releases its CPI data
Following the US CPI data release, CNBC reported that conventional markets were volatile, while crypto markets responded positively. According to CoinMarketCap, both BTC and ETH experienced a price increase.
CPI rose 0.4% on a seasonally-adjusted basis last month, with the department noting that the all-items inflation index increased by 6% over the past year. In addition, the Labor Department reports that the 12-month increase in inflation was the lowest since the period ending in September 2021.
CPI measures the average change in prices of a basket of goods and services over time. The Bureau of Labor Statistics calculates it and uses it as an indicator of inflation.
Consumer spending patterns on items such as food, housing, transportation, clothing, medical care, and recreation are reflected in the CPI. It is used to adjust wages, benefits, and social security payments for inflation, measure economic performance and determine monetary policy.
The U.S. Labor Department’s statement indicates that the shelter index contributed the most to the monthly all-items increase, accounting for 70% of the CPI increase in February 2023. However, food, recreation, home furnishings, and operations indices contributed.
The food index increased by 0.4%, while the food at home index increased by 0.3% last month. In February, the energy index decreased by 0.6%, along with the natural gas and fuel oil indices.
BTC price breaks $26k margin
BTC has frequently been promoted as an inflation hedge. As the actual CPI data matched the predicted figures, the price of Bitcoin surpassed $26,000.
According to Coinglass, over $85 million worth of trades were liquidated within one hour of the Bureau of Labor Statistics’ announcement. Peter Schiff, a renowned economist, has a hawkish outlook and expects inflation to skyrocket. However, despite all the interest rate increases, he believes that inflation has yet to reach the 2% target.
The next Federal Open Market Committee (FOMC) meeting is scheduled for March 22, 2023. The next FOMC meeting has an 86.4% chance of a 25 basis point interest rate hike.
Inflation has slowed since reaching a 41-year high of 9.1% in June, but it remains far above the Federal Reserve’s target of 2%. If the US banking sector had not been thrown into disarray, Tuesday’s inflation reading could have prompted the Fed to continue raising interest rates at their meeting next week.
However, because higher interest rates may have partially exacerbated Silicon Valley Bank’s problems, the report’s impact isn’t as clear. On Sunday, US Treasury Secretary Janet Yellen suggested that problems at Silicon Valley Bank were caused by “a higher interest rate environment” rather than problems in the tech sector.
On March 14, the broader crypto community offered a wide range of opinions. Anthony Pompliano, co-founder and partner of Morgan Creek Digital, commented on the CPI update in a series of tweets, highlighting Bitcoin’s price appreciation in response to the most recent inflation data.