On Tuesday morning, Bitcoin experienced a dramatic jump in price, bringing it to levels not seen since last summer. According to Coin Metrics, the cryptocurrency rose around 7% to $26,015.17 and chart analysts had anticipated this key level. Ether, the second largest cryptocurrency by market cap, was up 5% to $1,768.26, representing a 20% increase since Friday and a year-to-date rise of 45%.
The dramatic jump in price coincided with the release of the latest consumer price index reading, which showed an increase of 0.4% in February from January and an increase in the core CPI slightly above economists’ expectations. With the banking crisis and the likelihood of a rate cut this year rising, market sentiment vastly improved and the cryptocurrency market saw a 180-degree turn from its sentiment late last week.
Owen Lau, an analyst at Oppenheimer, stated that “the market believes that the Fed will pause rated earlier than before and the terminal rate will be lower than previously thought.” Bitcoin’s correlation with the Nasdaq is currently at its lowest level since the early November collapse of FTX. This indicates that price is largely driven by macro data, suggesting a larger return to that correlation even with the idiosyncratic events driving much of the action in 2023.
The recent surge in the cryptocurrency market is an indication that the outlook for the asset class is becoming more positive. With the banking crisis and CPI data, investors have become less anxious about the prospects of rising rates, paving the way for Bitcoin to reach its all-time high of $20,000, at least in the short-term. Whether the momentum continues remains to be seen, but the market is certainly optimistic in the near-term.