Cooling Inflation Sparks Crypto Market Rebound

Sentiment Status: Positive

The December PPI report showed a modest 0.2% monthly rise and stable core PPI, indicating potential inflation stabilization and boosting investor confidence.

The cryptomarket is experiencing a recovery after recent downturns, spurred by the latest U.S. wholesale inflation data. The Producer Price Index (PPI) report for December showed a smaller-than-expected increase, reflecting a potential easing of inflationary pressures.

Bitcoin and Major Cryptos Rally

Leading the charge, Bitcoin (BTC) surged by 5.2%, pushing its price above $96,700. Ethereum (ETH) followed suit, rising 7% to $3,225. XRP saw an important 10% increase, climbing to $2.68, while Solana (SOL) appreciated by 6%, reaching $187. This broad-based rally lifted the total cryptocurrency market capitalization by 4.4%, now standing at $3.51 trillion.

The past 24 hours had significant trading activity, with 89,529 traders liquidated and total liquidations amounting to $308 million. Both Bitcoin and Ethereum accounted for approximately $75 million each in liquidations, while various altcoins contributed $34 million. 

Cooling Inflation Fuels Optimism

The December PPI report revealed a month-over-month increase of just 0.2%, below the forecasted 0.4%. Year-over-year, the rate rose to 3.3%, while the core PPI remained unchanged, defying expectations of a 0.2% rise. These figures suggest that inflation may be stabilizing, positively influencing investor sentiment.

Marcus Sturdivant Sr., a former financial advisor at Tristate Financial Advisors, noted, "This cooler inflation read drove treasury yields lower and bolstered the stock market this morning." He added that if the upcoming Consumer Price Index (CPI) report confirms that cost savings for producers are being passed on to consumers, it could sustain the market's upward momentum.

A Respite After a Rough Week

This recovery comes after a challenging week for the markets, triggered by strong macroeconomic data that dashed hopes for interest rate cuts. Stronger-than-expected jobless claims and labor force participation rates raised concerns that interest rates might remain elevated for an extended period. Chris Chung, CEO and founder of Titan, remarked, "There appears to be a great deal of fear in the market that we may not see another rate cut at all in 2025, especially with an incredibly strong jobs report coming out on Friday".

Investors are now eagerly awaiting the December CPI report, which is expected to reflect similar trends to the PPI data.