Bitcoin surged above $116,000 on Friday following the release of fresh US inflation data, which heightened expectations of a Federal Reserve interest rate cut. This news boosted risk assets across the board, with Ether rising 2.5% to $4,519 and the overall crypto market gaining 1.5% to reach $4.1 trillion. These gains capped off a week of significant economic releases that underscored a shift in market sentiment.
Earlier in the week, the producer price index data revealed an unexpected 0.1% decline in wholesale inflation, contrary to the forecasted 0.3% increase. This was followed by consumer price index figures, which confirmed an acceleration in headline inflation but not enough to derail expectations of imminent monetary easing.
Furthermore, the Bureau of Labor Statistics made downward revisions to employment data for the 12 months through March 2025, revising down by approximately 900,000 jobs. This adjustment, which nearly halved the previous count, indicated that the labor market is weaker than previously believed.
Greg Magadini, director of derivatives at Amberdata, noted that the combination of stable inflation numbers and significant downward revisions to employment was steering the Federal Reserve away from a focus on price stability towards supporting growth. He mentioned that this shift in narrative increased the likelihood of a 50-basis-point rate cut either next week or at the October policy meeting.
As a result, risk assets such as Bitcoin and gold rallied in response, anticipating the impact of the expected easing. Investors viewed this as an opportunity to position themselves ahead of an imminent Federal Reserve action. Gadi Chait, an investment manager at Xapo Bank, highlighted Bitcoin’s resilience, with the cryptocurrency climbing to $114,000 earlier in the week.
The divergence between persistent inflation and weakening employment dynamics created a favorable backdrop for Bitcoin, as investors sought protection against currency devaluation risks and macroeconomic uncertainties. The rise in weekly jobless claims reinforced this perspective, keeping a September rate cut firmly on the table. Markets now anticipate swift action from the Federal Reserve to balance stubborn inflation with signs of slowing growth.
Institutional interest in Bitcoin was evident as spot Bitcoin ETFs attracted $553 million in net inflows on September 11, marking the fourth consecutive day of gains. Ethereum spot ETFs also saw an influx of $113 million, extending their streak to three days. Whether the Federal Reserve opts for a quarter- or half-point rate cut, Bitcoin remains an attractive investment option. Its role in portfolios is expanding, with investors recognizing it as a unique asset offering protection across various scenarios.
In conclusion, the surge in Bitcoin above $116,000 and the gains in Ether reflect the firming up of bets on a Federal Reserve rate cut. The cryptocurrency market continues to respond to economic data and investor expectations, showcasing its resilience and appeal as a hedge against economic uncertainties.