Bitcoin reached a milestone on Wednesday, briefly surpassing $100,000 as investors responded to fresh signs of easing inflation and a more favorable economic outlook. The cryptocurrency, which saw a 4% increase in 24 hours, reflected broader enthusiasm for risk assets, including equities, as expectations of a less aggressive Federal Reserve gained traction.
The latest rally comes as the U.S. Bureau of Labor Statistics reported that December's headline inflation rate held steady at 2.9% year-over-year, while core inflation-excluding volatile food and energy prices-eased to 3.2%, marking its first decline since July. The report added to speculation that the central bank might pivot toward rate cuts in 2025. Interest-rate futures markets are now pricing in an even chance of two cuts by year-end, creating a more favorable environment for cryptocurrencies.
Bitcoin's upward momentum was mirrored by other digital assets. Ethereum climbed 8% to $3,460, while Solana rose past $200. Altcoins like XRP also saw significant gains, with the Ripple-associated token rising 11% to just shy of $3. The surge reflects a renewed appetite for digital currencies following months of volatility linked to inflation fears and central bank policy.
The correlation between Bitcoin and traditional financial markets has grown stronger in recent months. Analysts note that the cryptocurrency has become increasingly sensitive to macroeconomic developments, particularly inflation data and Federal Reserve policy shifts. This trend underscores Bitcoin's evolving role as a more integrated financial asset, bridging the gap between traditional markets and the nascent digital economy.
Derivatives markets echoed the upbeat sentiment, with funding rates for Bitcoin perpetual futures climbing across major exchanges. According to Coinglass data, open interest-weighted funding rates reached 0.0076% during the most recent eight-hour contract cycle, signaling increased confidence among traders. Meanwhile, a wave of short liquidations further fueled the rally, with over $263 million in liquidated positions, including $63 million tied to Bitcoin shorts.
This latest price movement comes at a pivotal moment for Bitcoin and the broader crypto market. With Donald Trump set to assume the presidency next week, investors are closely watching for potential pro-crypto regulatory shifts. Trump's administration has hinted at possible executive orders, including the creation of a presidential crypto council, which could provide much-needed clarity and boost adoption.
The cryptocurrency's climb past $100,000 also follows the adoption of spot Bitcoin exchange-traded funds in the U.S., a development that has bolstered institutional interest in digital assets. These ETFs, alongside inflation data and anticipation of favorable policies, have created a fertile ground for Bitcoin's recent performance.
Market participants are closely monitoring broader economic conditions, particularly the S&P 500, which is testing critical resistance levels. A sustained breakout in equities could signal the continuation of a global asset bull market, further supporting Bitcoin's trajectory. Analysts believe this convergence of macroeconomic factors and technical indicators could mark the beginning of a transformative period for risk assets.
Despite the optimism, the crypto market remains susceptible to volatility. Past surges have often been followed by sharp corrections, and the Federal Reserve's future policy moves remain uncertain. Nonetheless, Bitcoin's brief return to the $100,000 level represents a symbolic milestone in its ongoing journey toward mainstream acceptance.
