Bitcoin Surges to $63.7K Despite U.S. CPI Falling 0.3% Short in April

Following the release of softer-than-expected U.S. Consumer Price Index (CPI) data for April, Bitcoin experienced a notable surge. The digital asset climbed more than 1% in the immediate aftermath of the Wednesday morning report and reached $63,700.

Despite this surge, analysts believe that a $70,000 price is on the horizon. This optimism in Bitcoin price is expected to happen in May.

The Dynamics of Inflation

The monthly inflation rate in the U.S. moderated slightly in April, with the CPI rising by 0.3%, compared to 0.4% in March. Economists had made a forecast of 0.4%. Year-over-year, CPI increased by 3.4%, slightly below estimates of 3.5%.

Core CPI, which excludes food and energy prices, also rose by 0.3% in April. This aligned with expectations, but lower than March’s 0.4%. Year-over-year, core CPI was up by 3.6%, matching forecasts but down from March’s 3.8%.

Bitcoin and Monetary Policy Expectations

The reaction in the Bitcoin market reflects the complex interplay between inflation data and monetary policy expectations. Despite the anticipation of easier monetary policy due to declining inflation in 2023, the actual rise in inflation in 2024 has shifted market sentiment.

Furthermore, analysts including former BitMEX chief executive Arthur Hayes are confident in the future of Bitcoin. They project that having hit a local bottom, Bitcoin will gradually rise over the coming months.

This has led to the abandonment of expectations for imminent central bank rate cuts, with the U.S. Federal Reserve now unlikely to implement significant policy changes in the near term.

Traditional Markets Responses

The soft inflation data coincided with retail sales figures for April, which showed a flat reading compared to forecasts of a 0.4% increase and March’s 0.6%. Retail sales excluding autos rose by 0.2% in April, meeting expectations but down from March’s 0.9%.

Traditional markets responded positively to the soft inflation and economic data. This is as S&P 500 futures rose by 0.5% and the 10-year Treasury yield declined by seven basis points to 4.37%. The U.S. dollar index also dropped by 0.5%, while gold saw a gain of 0.7%.

Experts say the market reaction lends credence to the importance of economic indicators in shaping investor sentiment and asset prices. Meanwhile, Bitcoin is experiencing inflows with the U.S leading the charge with a total of $135 million in crypto inflow.