Crypto Markets Surge On Inflation Hitting Three-Year Low

Investors anticipate the Federal Reserve will cut interest rates later this year.

Crypto markets rallied on Thursday after data revealed that U.S. inflation fell to its lowest level in over three years during June.

According to the Labor Department, the consumer price index (CPI) — which measures the cost of goods and services — fell by 0.1% in June. This lowered the annual rate to 3%, the lowest it has been since April 2021. Excluding food and energy prices, the core CPI increased by 0.1% for the month and 3.3% year-over-year.

These data came in lower than expected, with Dow Jones analysts previously tipping a 0.2% monthly rise and a 3.4% annual increase, according to the Bureau of Labor Statistics.

The inflation dip provides the Federal Reserve with more room to potentially decrease interest rates later this year.

The data also comes after Jerome Powell, the chair of the Federal Reserve, hinted at potential rate cuts during his congressional testimony on Tuesday. Powell warned that prolonged high interest rates could harm the U.S. economy, and noted that a cooling labor market indicates that inflationary pressure is easing.

Crypto markets react

Bitcoin (BTC) responded with a 2% price jump in the last 24 hours to trade above $59,000, while Ethereum (ETH) climbed by 3% to test $3,200.

The rally extended a digital asset recovery after the violent weekend sell-off.

BTC dropped by 16.5% to a low of $53,500 on July 5 after tagging a local high of $63,800 on July 1. Glassnode, an on-chain analytics platform, described the dip as Bitcoin’s “deepest correction since late 2022.”

“Between May and July, the market experienced its deepest cycle correction, recording a drawdown exceeding -26% from the all-time high,” Glassnode said in a July 7 report.

Among the top 100 cryptocurrencies by market cap, Stacks (STX) led with a 12% gain in a single day. ZkSync (ZK) and Aave (AAVE) also performed well, rising by 6.5% and 6.1% respectively. Polkadot (DOT) and Solana (SOL) both rebounded by 0.5%.

Over the past 24 hours, 34,000 crypto traders were liquidated, totaling $96 million in liquidations, according to data from CoinGlass. Despite the bullish market momentum, long positions accounted for 57% of the margin calls.

In the stock market, futures tied to the S&P 500, Nasdaq 100, and Dow Jones Industrial Average all jumped by 0.3%.

Related: Is This the End of the Crypto Bull Market? History Says No