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Bitcoin (BTC) Price Jumps Above $18K as CPI Shows Cooling Inflation

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Cemile Bingol | Digital vision vectors | Getty Images

bitcoin on Thursday it rose to its highest price in more than two months as traders bet on a cooling of US inflation and digesting news that lawyers for defunct crypto exchange FTX found billions of dollars in assets.

The world’s largest digital currency by market capitalization rose above $19,000 for the first time since Nov. 8, increasing in value by 8.4%. Bitcoin last traded at $19,013.30, according to CoinMetrics.

US inflation data released on Thursday showed a modest pullback. The consumer price index fell 0.1% in December month-on-month, in line with Dow Jones estimates.

Prices still increased by 6.5% year-over-year, however. This is down from a 7.1% jump in November and well below a peak rate of 9.1% in June. Investors are hoping the decline could put pressure on the US Federal Reserve to reverse interest rate hikes.

The Fed and other central banks have raised interest rates over the past year in an effort to tame rising inflation, in moves that have forced stocks and cryptocurrencies to fall sharply in 2022.

The hope now is that the US central bank will cut rates, taking some of the pressure off risky assets.

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Elsewhere, lawyers for bankrupt crypto exchange FTX said on Wednesday that they found about $5 billion in “liquid” assets, including cash and digital assets. The recovery will be a welcome boon for FTX customers following the cryptocurrency exchange’s implosion in November.

FTX’s lawyers, however, warned that the $5 billion cache was so high that the sale of the assets could lead to significant downward pressure on the market, reducing its value.

Bitcoin is down about 74% from its November 2021 all-time high of $68,990. Last year, nearly $1.4 trillion in value was wiped out of the cryptocurrency market as traders dumped risky assets such as technology and growth stocks.

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Bitcoin and the wider digital currency market also dropped, suggesting a growing correlation with major equity benchmarks such as the Nasdaq Composite.

The drop was also caused by crypto-specific issues, including the collapse of projects and companies like FTX and Terra.

However, Bitcoin started 2023 on a positive basis, with its price rising steadily over the past 12 days.

“Bitcoin has been in a downtrend for over a year, which is a standard period of a crypto bear market,” Vijay Ayyar, vice president of international and corporate development at crypto exchange Luno, told CNBC in comments by email on Thursday morning.

“We’ve had a lot of negative events going on in the last year, and if you look at the price reaction to those events, overall it’s been falling less and less – an indication that the market is taking the news very well, selling pressure is being absorbed. and so we are moving into an accumulation stage,” added Ayyar.

“It could also mean that the market thinks the worst is over for cryptocurrencies and the most negative news is already priced in.”

Other digital currencies were boosted by the jump in bitcoin prices on Thursday. Ether, the second-largest coin, was up nearly 5% to $1,397.78, while Binance’s BNB token was up 3% to $283.

Changpeng Zhao, CEO of Binance, told CNBC on Wednesday that the exchange plans to increase hiring by 15% to 30% in 2023, in contrast to other exchanges that have cut jobs.

Binance, which previously earmarked $1 billion for a fund meant to prop up the industry after the FTX collapse, has been plagued by fears about the soundness of its reserves. The auditor working on the company’s so-called proof of reserves, Mazars, stopped all work with cryptocurrency companies in December.

Binance says it has more than enough assets to cover liabilities.