Bitcoin price declined on Tuesday afternoon, reversing the day’s early gains, as the broader crypto market reacted to the latest financial sector crisis and inflation data headlines.
Bitcoin (BTC) was trading at $24,833 at the time of writing, down 8% from its intraday high of $26,502 on Tuesday morning, its highest level in nine months, according to data from crypto market tracker Coingecko.
In response to the publishing of the latest Consumer Price Index (CPI) data for the month of February 2023, BTC witnessed a quick and considerable increase, surpassing the $26,000 mark.
Bitcoin registered this multi-month milestone after the U.S. Bureau of Labor Statistics reported that the CPI for All Urban Consumers (CPI-U) rose 0.4% in February, down from 0.5% in January.
CPI Data’s Impact On Bitcoin Price
This suggests that the release of CPI data had a discernible effect on the cryptocurrency market, causing investors to boost their Bitcoin holdings.
The CPI is a measure of inflation in the US, which measures the changes in the prices of goods and services over time. Its release frequently causes changes in market sentiment as investors adjust their portfolios in response to economic changes.
Statistics from TradingView indicated BTC/USD setting monthly highs of $24,917 on Bitstamp overnight. When the impact of multiple US bank closures pushed crypto markets soaring, the pair stayed bullish.
Bitcoin climbed to heights that were not reached since last summer on Tuesday, continuing its advance for a second day as investors evaluated the latest inflation figures.
Bitcoin Temporarily Hits $26K
Coin Metrics data indicates that Bitcoin was up 3.4% at $25,150 at its most recent valuation. Experts had identified $25,400 as a significant level to monitor.
Meanwhile, Bitcoin’s minor pause in price gains and changing course back to the $24K region could imply that Federal Reserve managers face less compulsion to lift their benchmark rate’s target spectrum in hopes of bringing inflation in check.
If the Federal Reserve (the central bank of the United States) raises interest rates slowly over time, it might be good for bitcoin. Bitcoin is considered a risky investment because it doesn’t pay any interest to its investors.
But when interest rates rise, it becomes more expensive for companies and individuals to borrow money, so they are less likely to invest in risky assets like bitcoin. Instead, they may choose to invest in safer investments that pay them interest.
So if interest rates rise slowly, investors may still be willing to invest in bitcoin instead of those safer investments.
Crypto total market cap reclaims the $1 trillion mark on the daily chart | Chart: TradingView.com
Since late last week, cryptocurrency prices have risen considerably, with market sentiment making a U-turn as U.S. regulators acted swiftly to rescue depositors of Silicon Valley Bank and Signature Bank.
Caitlin Long, chief executive and founder of Custodia Bank, underscored the noteworthy price performance of Bitcoin amidst a tumultuous week marked by the closure of the two lending institutions by U.S. authorities:
— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) March 14, 2023