- BTC price jumped to the year-to-date high of over $26,000.
- This rally led to a surge in altcoins like Liquity, Alchemy Pay, and Threshold (T).
- America's inflation remained stubbornly high in February.
Bitcoin price jumped above $26,000 for the first time in months as investors focused on the latest US inflation data and the price action in the bond market. China’s Conflux was the best-performing cryptocurrency as its CFX token jumped to $0.30. RIF jumped by 48% while Liquity, KEY, Threshold, and Alchemy Pay (ACH) soared by over 30%.
Bitcoin price soars
The main reason why these altcoin prices jumped is the performance in the bond market. Market data shows that Treasury yields have pulled back from their year-to-date highs. The 10-year yield was trading at 3.59% while the 2-year note was stuck at 4.2%. Last week, the two were trading at 4% and 5%, respectively.
The performance of the bond market comes at a time when there are worries about the financial market following the collapse of Silicon Valley Bank (SVB) and Signature Bank. In the aftermath, most analysts and investors started re-assessing the next actions by the Federal Reserve.
Now, most analysts believe that the Fed will hike interest rates by 0.25% next week. Fed futures data also imply that some analysts expect that the bank will not hike rates at all. If it continues with its aggressive tone, the fear is that the Fed will break some things along the way.
Proponents of more rate hikes point to two things. First, they argue that the collapse of the three banks was not caused by the Federal Reserve. Instead, the companies’ management teams decided to take risks, which backfired.
Second, if the Fed stops hiking, then it will encourage risky investor behaviour. Indeed, the performance of the crypto market in the past two days is further evidence of this.
Read more: How to buy Bitcoin.
Inflation remains stubbornly high
Bitcoin price soared even after the latest data revealed that US inflation remained stubbornly high in February. According to the Bureau of Labor Statistics (BLS), the headline consumer price index (CPI) remained at 0.4% in February and dropped to 6.0% on a year-on-year (YoY). Core inflation rose to 0.5% on a MoM basis and dropped to 5.5%.
These figures mean that inflation is not falling as fast as the Fed would like. Its target is at 2%, which means that it will take a longer period to get there. Therefore, there is a likelihood that the Fed will not abandon its hawkish view in the near term.
Historically, Bitcoin prices tend to react negatively to any hawkish tone by the Federal Reserve. This explains why its price dropped hard in 2022. Therefore, it is unclear whether BTC, Liquity, Conflux, Immutable X, Alchemy Pay, and Threshold will maintain their bullish trend.
