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Cryptocurrency prices briefly surged on Wednesday following the release of the April consumer price index (CPI) report. Bitcoin, which initially gained over 2%, settled above the flatline at $27,748.24, according to Coin Metrics.
At one point, it reached a high above $28,000, while Ether also trimmed its gains and recorded a less than 1% increase at $1,854.33.
Investor optimism grew after the CPI report indicated that the inflation rate had eased to 4.9% in April, slightly lower than economists' forecast polled by Dow Jones. Callie Cox, an analyst at investment company eToro, stated, "When it comes to inflation data, Bitcoin embraces its identity as a riskier asset. Bitcoin has outperformed the S&P 500 on five out of the last six CPI days - and it's on track to make it six out of seven with today's gains."
According to Steven Lubka, Managing Director at Swan Bitcoin, the CPI coming in below economists' forecast reinforces the market's expectation of a halt in rate hikes and the possibility of rate cuts later this year.
"Ultimately, this represents an easing of tight liquidity conditions, an environment in which bitcoin has historically performed exceptionally well," he added.
In 2022, Bitcoin's correlation with the S&P 500 reached historic highs as the Federal Reserve raised interest rates throughout the year, resulting in a 65% decline in the price of the flagship cryptocurrency. However, this year, the correlation with stocks has diminished.
On the other hand, Bitcoin's price has shown an increased correlation with gold. Moreover, the cryptocurrency has been influenced by factors beyond inflation and the Federal Reserve, including the regional banking crisis and the regulatory crackdown in the U.S.
More recently, market participants have been focused on Ordinals, a protocol that facilitates the storage and trading of digital content on the Bitcoin blockchain, as well as memecoins.
