Bitcoin broke the $26,000 barrier for the first time in nine months after the latest CPI report by the Bureau of Labor Statistics showed that inflation remains a major concern in the US. The CPI, which tracks changes in prices across a wide range of goods and services, increased by 6.0% in the 12 months leading up to February, exceeding the Federal Reserve’s target of 2%.
Following this report, Bitcoin surged 5% to reach $26,295, while Ethereum climbed 4% to $1,778, according to CoinGecko. Other tokens like Dogecoin and Solana also rose, adding to gains made on Monday. Despite some signs of easing since it hit a 41-year high of 9.1% last June, inflation remains significantly higher than the Federal Reserve’s target of 2%.
The largest monthly increases in CPI came from food, recreation services, and shelter, accounting for 70% of the monthly increase. Meanwhile, energy prices fell by 0.6% month-to-month after increasing by 2% in January. Core CPI, which excludes volatile food and energy prices, was slightly above economists’ expectations at 0.5% compared to 0.4%. Jay Bryson, Chief Economist at Wells Fargo, said that inflation is “certainly not licked,” adding that core inflation is “still well above where the Fed would like to see it.”
To control inflation, the Federal Reserve has raised interest rates aggressively, which has made borrowing more expensive for businesses and consumers, cooling down the economy. However, the recent collapse of several US banks, including crypto-friendly Silvergate Bank and Signature Bank, has complicated the situation. The report’s impact is unclear as it is uncertain whether the banks’ problems are a result of higher interest rates. Cryptocurrency prices rose yesterday as investors recalibrated their expectations of future rate hikes from the Federal Reserve. The possibility of the Fed raising interest rates by 50 basis points next week was eliminated as traders believed a pause was more likely. “Binance’s announcement that they would liquidate 1 billion BUSD in exchange for BTC, ETH, and other assets is a strong catalyst of the recent price action,” said the “Head of Research’ at Kaiko. “Overall, the recovery of USDC, Binance’s BUSD announcement, and slowing inflation have triggered a market rally, but the industry faces significant headwinds.”