Bitcoin Surges 4.4% as U.S. Inflation Slows to 2.4%

Bitcoin has experienced a slight increase in recent days, following a dip in late May. This upward trend comes as the U.S. reported a slower inflation rate in May, with prices rising by 2.4%. This figure is notably lower than the predictions of all 73 forecasters in the latest survey, indicating that the trade war initiated by former U.S. President Donald Trump has had a limited impact on prices. The largest cryptocurrency by market capitalization has risen from just below $109,000 to closer to $110,000, marking a 4.4% gain over the past seven days. This surge is attributed to renewed hopes for a resolution in tariff tensions and the growing list of companies considering Bitcoin for their corporate treasuries.

Major altcoins have mirrored Bitcoin's price pattern, with Ethereum, the second-largest cryptocurrency by value, and Solana experiencing significant gains. Ethereum has risen by 1.7% in the past hour and 7.3% over the past week, while Solana is currently trading at $167.09. The momentum in the crypto market is driven by macro demand for Bitcoin and regulatory clarity for decentralized finance (DeFi), suggesting that the rally could continue regardless of the Federal Reserve's actions.

The Consumer Price Index (CPI), a key measure of inflation, showed that prices increased by 0.2% compared to April, which is lower than most economists' forecasts. This brought the annual inflation rate to 2.4%, slightly above the U.S. central bank's 2% target. Core pricing, which excludes volatile food and energy costs, rose by 0.1% from the previous month, resulting in an annual rate of 2.8%. These figures follow April's inflation measures, which were cooler than expected, with the Personal Consumer Expenditures rising by just 0.1%. This has buoyed investors hoping for a rate reduction.

The Federal Reserve has indicated that any rate cut would be based on data showing sustainable waning inflation. Rate cuts are generally seen as beneficial for digital assets. After reducing the rate to a range between 4.25% and 4.50%, the Fed has kept rates unchanged at its last three meetings. The CME FedWatch tool calculated a 99% probability that the central bank would maintain the current rate, with a more than 50% likelihood of a cut in September. Financial markets remain optimistic, with a strong possibility that Bitcoin could reach a new all-time high, as its price is just a few percentage points below its previous peak. However, there is a risk of a reversal if upcoming economic data disappoints, particularly with the focus on the U.S. inflation report. A higher-than-expected reading could trigger increased volatility across risk assets, including cryptocurrencies.