Crypto Prices Rally on Cooling CPI Inflation Data, Market Cap Soars by $130B

• A rebound in crypto prices brought welcome relief to investors.
• Market leader Bitcoin showed strength on Wednesday.
• Market sentiment enjoyed a much-needed boost.

Cryptocurrency markets had been trending downwards over the past two months as the frenzy from US spot Bitcoin ETF approvals fizzled out. As prices retreated, bearish sentiment became the dominant narrative, with some questioning if the recent market top signaled the end of the bull cycle.

However, crypto prices staged a remarkable comeback on Wednesday in a strong reversal triggered by cooling US inflation. Total crypto market cap inflows this week topped $130 billion, leading to reinvigorated bullish sentiment following the downtrend of the previous two months.

Crypto Prices Bounce Back

This week’s reversal in crypto prices added $130 billion to the total crypto market cap, with the combined value of all digital assets moving from $2.26 trillion on Monday to $2.39 trillion at the time of writing, according to data from CoinMarketCap.

The Crypto Fear and Greed Index, which tracks market sentiment, soared to a reading of 70, close to nudging into the extreme greed zone. This marked a significant uptick from the local bottom 53 recorded on May 11.

Among the top 100 cryptocurrencies by market cap, the biggest gainers over the last seven days were Pepe, FLOKI, and Fantom, which gained 27%, 21%, and 19%, respectively, at the time of writing.

Meanwhile, market leader Bitcoin gained 8% over the past week, reaching an intraday high of $66,800 on Thursday to mark a 22-day high. Analysts attributed the rebound in crypto prices to cooling US inflation.

US CPI Inflation Better Than Expected

The rebound in crypto prices was attributed to the release of US inflation data showing monthly CPI inflation for April came in at 0.3%, lower than the expected figure of 0.4%. The better-than-anticipated reading provided relief to markets that have been grappling with the Fed monetary tightening policy.

Oliver Pursche, senior vice president and adviser at Wealthspire Advisors, stated that the CPI report showed “progress is being made on the inflation front.” While the better-than-expected monthly figure won’t change the Fed’s stance, Pursche noted it still signals the economy is “moving in the right direction.”

According to the CME Group, the odds currently stand at 91.3% that the Fed will leave rates unchanged at 5.25-5.5%. Just 8.7% of traders expect a 0.25% rate cut at the next FOMC meeting, which is scheduled to conclude on June 12. 

On the Flipside

• Volatile crypto markets can turn in an instant. However, the strength of Bitcoin‘s gains since Wednesday is a positive sign for bulls in the short term.
• US stocks also saw strong gains from cooling CPI inflation data.
• Inflation is a cumulative metric, meaning “falling inflation” doesn’t necessarily equate to falling prices. 

Why This Matters

The rebound in crypto prices provided a much-needed boost to investor sentiment. However, rising geopolitical tensions, regulatory hostility, and macroeconomic weakness are looming potential headwinds against bullish momentum.

In another reversal sign, Bitcoin ETF flows turn net positive:
Bitcoin ETFs See $303M Inflows as BTC Soars North of $65K

Andrew Tate considers spring fortune into Bitcoin over fiat distrust:
Andrew Tate Mulls $100M Bitcoin Buy, Says Done with Banks