Bitcoin, XRP Climb. Why the Crypto Reaction to Inflation Data Is a Worry. — Barrons.com
By Callum KeownBitcoin, XRP and other cryptocurrencies jumped Friday, recovering from a mini-slump that hit digital assets following the latest U.S. inflation data.Bitcoin was trading at $87,836 early in the day, up 1% over the past 24 hours according to CoinDesk data. The world's largest cryptocurrency initially spiked to $89,000 after Thursday's consumer price index data came in lower than expected but just a few hours after it slumped below $85,000. It's more than 30% off its record high of above $126,000 set in early October.Ethereum, the second largest cryptocurrency, was up 3.4% at $2,938, while popular altcoin XRP edged 0.4% higher to $1.86."Bitcoin's erratic price action reflects both the seller-dominated crypto market and elevated uncertainty around the broader macro trajectory," CF Benchmark analyst Gabe Selby said. He added that the market's "rejection" of the CPI data was significant. "It shows sellers remain firmly in control and reinforces the view that Bitcoin is still trading within a broader downtrend."Bitbank analyst Yuya Hasegawa said investors quickly had second thoughts about Thursday's data. "With gaps in October and monthly inflation data complicating the trend assessment, market participants hesitated to extrapolate a clear disinflation narrative," he said.Subsequently, as U.S. stocks pulled back from their intraday highs, so did cryptocurrencies.Inflation data hasn't really moved the dial on rate cut expectations for early next year. Markets see a 27% chance of a cut in January, up from 24% a day ago, according to CME's FedWatch tool. For March, the probability rose to 57% from 54%.Cryptocurrencies tend to benefit from lower borrowing costs as it makes them more attractive relative to lower-yielding assets. But they need clearer signs that more cuts are coming for a sustained rebound to take hold.Write to Callum Keown at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.