Bitcoin, IOTA, XRP, and other cryptocurrencies bounced back on Tuesday as crypto investors cheered a key US inflation report. BTC climbed back above $96,000, while IOTA and XRP jumped to $0.3513 and $2.70. The total market cap of all cryptocurrencies jumped by 5.2% to $3.37 trillion.
Bitcoin, IOTA, XRP, and altcoins prepare for US inflation data
These coins rallied after the US released the latest producer price index (PPI) data that came short of expectations. The headline PPI data came in at 0.2%, lower than the median estimate of 0.4%. Core PPI, which strips the volatile food and energy products, fell from 0.2% to 0.0%.
Bitcoin, IOTA, and XRP will next react to Wednesday’s Consumer Price Index (CPI) data, which will provide more information about the next Fed action. Economists believe inflation remained higher in December, a trend that may continue because of the ongoing Los Angeles fires and Trump’s policies.
The headline CPI will come in at 2.9%, the highest level over eight months. Core inflation will remain at 3.3%, 1.3% higher than the Fed’s target of 2.0%. Therefore, if the official numbers are in line or higher than estimates, they will point to a more hawkish tone by the Fed.
Big bank analysts have started to pare back their Fed actions. ING Bank sees the Fed cutting rates two times, down from three, while Bank of America sees no cuts this year. In a note, the analysts said:
“After the stronger-than-expected December jobs report, we revised our Fed outlook: we no longer expect any additional rate cuts. Inflation is stuck above target, with risks skewed to the upside, activity is strong and the labor market now appears to have stabilized.”
Cryptocurrency prices often underperform when the Federal Reserve is hawkish. That’s partly because such a view leads to higher bond yields and a rotation from risky assets to money market funds. This explains why Bitcoin and other altcoins have pulled back recently while bond yields have soared to a multi-year high.
Earning season is starting
The other potential catalyst for Bitcoin and altcoins like IOTA and XRP is the upcoming earning season that kicks off on Wednesday. Some of the most important companies to report their results are Blackrock and big banks like Goldman Sachs and JPMorgan.
Blackrock will be a notable company to watch because it has become the biggest player in the crypto custody services. As such, a statement by Larry Fink, the CEO, may impact crypto prices. There are also odds that more companies will announce their crypto strategy this earning season.
The earnings season will also impact crypto prices depending on how it goes. If the earnings season is strong, stocks will likely rise, possibly dragging other risky assets like cryptocurrencies higher.
