Bitcoin News Today: Bitcoin Surges on Dovish CPI as Fed Rate-Cut Odds Rise

Bitcoin Surges Past $89,500 as Inflation Data Shifts Market Outlook

Bitcoin surged past $89,500 as the latest U.S. inflation data painted a starkly different picture from expectations. The Consumer Price Index (CPI) for November dropped to 2.7% year-over-year, marking one of the largest declines in several years and well below the projected 3.1%. This unexpected cooling in inflation has reignited hopes for more aggressive Federal Reserve rate cuts in 2026.

The core CPI, which strips out volatile food and energy prices, also fell to 2.6%, matching its March 2021 level. Analysts and traders quickly took notice, with some calling it the strongest indication yet that the Fed could soon cut rates more aggressively than previously anticipated.

Bitcoin's sharp rise followed a broader market rally across risk assets, as investors priced in a more dovish central bank outlook. The dollar weakened, and bond yields fell, amplifying the appeal of BTC as a high-beta play.

Market Volatility and Liquidity Challenges

Despite the positive sentiment, Bitcoin struggled to hold its gains. The price briefly spiked above $89,500 but then reversed lower, reflecting ongoing liquidity challenges in the crypto market. Cointelegraph Markets Pro and TradingView data showed high volatility as traders navigated the rapidly shifting inflation landscape.

The sharp CPI miss has added to the uncertainty surrounding Bitcoin's price action, with some analysts noting that the asset is now repeating patterns seen in early 2025. The market remains in a state of flux, with traders closely monitoring the Fed's next move.

Rate Cut Prospects and Central Bank Focus

The latest CPI reading has shifted the odds for a January rate cut by the Fed. According to the CME Group's FedWatch tool, the probability of a rate cut at the January meeting increased significantly. This aligns with broader expectations that the Fed may adopt a more aggressive stance in the coming months.

New York Fed President John Williams emphasized in a recent speech that the central bank is focused on balancing the risks between inflation and the labor market. He noted that both inflation and employment trends are gradually improving, reinforcing the case for further rate cuts in 2026.

The Fed's recent decision to restart balance sheet expansion through reserve management purchases has also been seen as a sign of market support. By purchasing short-term Treasurys, the central bank is injecting liquidity into the financial system, which could further bolster risk assets like Bitcoin.

Broader Economic Implications

The CPI report comes after a weak jobs report and a slowing labor market, both of which have contributed to the growing narrative that the U.S. economy is cooling. The unemployment rate rose to 4.6% in November, the highest since 2021, signaling ongoing softness in the job market.

Market experts and political figures are also pushing for further rate cuts. President Donald Trump, for example, has called for rates to fall to as low as 1%, while White House advisor Kevin Hassett, a favorite to replace Jerome Powell as Fed chair, has expressed support for rate reductions.

The broader economic environment is also being shaped by the Fed's new balance sheet strategy. Unlike traditional quantitative easing, the current approach focuses on maintaining financial stability rather than directly stimulating the economy. This distinction has been a point of debate among economists, with some viewing it as a necessary step and others warning of potential fragility in the banking system.

As the new year approaches, all eyes will be on the Fed and the evolving inflation landscape. With Bitcoin at the center of the action, investors are bracing for more volatility as central bank policy continues to shape the markets.