Bitcoin surpasses $84,000 as US inflation eases, attention turns to Fed policy

Bitcoin soared past $84,000 as investors eagerly awaited US inflation data for February, which indicated a more significant decline than anticipated. This development sparked optimism that the Federal Reserve might adjust monetary policy sooner than expected, leading to a surge in Bitcoin’s value.

According to the US Bureau of Labor Statistics, the US Consumer Price Index rose by 2.8% year-on-year in February, a decrease from the previous month’s 3% and below the projected 2.9%. This softer inflation reading brought the rate closer to the Fed’s 2% target, a crucial benchmark that could influence future decisions on interest rates. Consequently, Bitcoin experienced a rapid jump following the inflation release, continuing its recovery from a recent sell-off.

Previously, Bitcoin had been trading steadily around $82,700 after recovering from a dip below the 200-day Exponential Moving Average, which stood at $85,664 on Sunday. The cryptocurrency had suffered a 9.14% decline in a single day, hitting a support level at $78,258 before bouncing back by 5.52% on Tuesday.

Agne Linge, the Head of Growth at WeFi, observed that the cryptocurrency market displayed a risk-on attitude, albeit with cautious investor sentiment. Despite significant developments such as a Bitcoin reserve announcement in the US, sell-offs persisted since March 3, resulting in substantial liquidations impacting long traders.

Meanwhile, uncertainty stemming from global trade tensions and Federal Reserve policy continued to cast a shadow over cryptocurrency markets. A recent Bitfinex report pointed to a complex macroeconomic environment characterized by steady job growth, increased wages, and improved efficiency. However, the report also noted inflationary pressures, cautious business expansion, and other factors contributing to market uncertainty.

Although the US labor market added 151,000 jobs in February, with a rise in wages typically supporting consumer spending, concerns about inflation could complicate expectations for multiple Fed rate cuts in the future. While a cooler inflation print historically boosted risk assets like cryptocurrencies by increasing bets on Fed rate cuts, the Trump administration’s aggressive trade policies introduced further uncertainty. As a result, some investors started shifting towards safe-haven assets like gold instead of speculative markets like cryptocurrencies.