Author: Mary Liu, BitpushNews

On Wednesday afternoon, the soft US Consumer Price Index (CPI) data boosted investors' expectations of a rate cut, leading to a rise in the financial markets.

Data provided by the US Bureau of Labor Statistics showed that the "core" CPI, which excludes food and energy prices, rose by 3.6% year-on-year. This data is in line with market expectations and represents a slight cooling from the 3.8% increase in March, with the CPI for April rising by 0.3% month-on-month, lower than the expected 0.1%.

This is the first time in over four months that the data has met or fallen below market expectations, and traders see this as a positive signal for the possibility of interest rate cuts before the end of the year.

Data from the CME FedWatch tool shows that after the release of the CPI, the market currently expects a 70% likelihood that the Fed will begin cutting interest rates at the September meeting, up from 45% last month.

Benefiting from the positive impact of the low CPI, the S&P, Dow Jones, and Nasdaq indices all reached or approached historical highs on Wednesday, closing up by 1.17%, 0.88%, and 1.40% respectively.

According to Bitpush data, Bitcoin was on an upward trend on Wednesday, rising from a low of $61,315 in the afternoon to a high of $66,420. At the time of writing, the BTC trading price was $66,035, up 7.21% in 24 hours.

Altcoins rose under the momentum of Bitcoin on Wednesday, with almost all of the top 200 tokens by market capitalization seeing gains. Livepeer (LPT) performed the best, rising by 20.8%, followed by Axelar (AXL) and GMX (GMX) with gains of 18%. Ribbon Finance (RBN) saw the largest decline, falling by 21.5%, while Pepe (PEPE) fell by 2.6% and Starknet (STRK) fell by 1.9%.

The current total market value of cryptocurrencies is $2.38 trillion, with Bitcoin's dominance rate at 54.7%.

CPI Cooling Does Not Equal Victory for Fed's Inflation Progress

Despite the market's positive response to the CPI data, Bit Mining's Chief Economist and Vice President Youwei Yang warned that it is still too early to declare victory in the progress of inflation.

In a report, she stated, "Despite the implementation of loose policies and the expected 3.4% inflation rate of the Consumer Price Index (CPI), the current global economic situation still resembles a dangerous mild stagflation scenario. Today's policymakers seem to underestimate the stagflation risk, echoing the situation of the 1970s, although extreme inflation rates from that era have not appeared."

She added, "Despite these risks, many investors and policymakers remain overly optimistic, as evidenced by the historically high price-earnings ratios in many major market sectors. When the market faces potential risks, cryptocurrencies are always the first to react, so they have been declining over the past few months, despite the seemingly worrying false prosperity brought to the financial markets by AI-driven stocks."

Analysts at Bitfinex also expressed concerns, warning that the decline in CPI does not guarantee that the Fed will lower interest rates.

They stated, "Investors see this as a bullish shift, as it marks the first decline in the Consumer Price Index (CPI) inflation in the past three months, and it comes after the Fed announced its intention to gradually reduce quantitative tightening policies. Over the past two months, the CPI has formed a local top, so this is seen as favorable for risk assets, but it has had the opposite effect. However, our inflation rate is still above 3%, and yesterday's PPI inflation data showed a rise for the third consecutive month. Although the decline in inflation data is good news, investors will have to wait and see if the Fed considers this to be positive enough news to cut interest rates."

Leena ElDeeb, a research assistant at 21Shares, stated, "CPI alone is not enough to convince the Fed to cut interest rates, especially considering that the data is still well above the 2% target, as expressed in the FOMC meeting two weeks ago. The hope for a rate cut in the short term is becoming slim."

ElDeeb warned, "As the rate cut remains in question, the recovery may be slow. Typically, higher interest rates reduce the attractiveness of tech stocks and risk assets like Bitcoin, as investors can obtain substantial returns from safer options such as US Treasury bonds. This prompts short-term investors to turn to traditional markets."

ElDeeb added, "However, despite the short-term impact on the market, many investors hold a long-term view of Bitcoin, seeing it as a global asset that can prevent currency devaluation and economic instability. While the Fed's policies may trigger short-term fluctuations, they will not fundamentally alter Bitcoin's long-term trajectory."

She concluded, "Therefore, Bitcoin currently holds a unique position as an asset for risk tolerance and risk mitigation, leading to unique market dynamics."

Dan Tapiero, CEO of investment firm 10T Holdings, believes that if Bitcoin can regain support at $65,000, its price could continue to soar by over 45%. He stated on X platform, "Breaking $65,000 will go straight to $90,000… and then more, very clear horizontal overlapping flag consolidation is about to complete."

Market analyst Mustache agrees with Tapiero's speculation and pointed out on Wednesday, "Bitcoin's weekly Stoch RSI has just crossed bullish," indicating that "the biggest trend is about to come."

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