Bitcoin rebounds as inflation rises 2.9% in December

Mumbai: Bitcoin rebounded strongly on Wednesday to touch 98800, up 2 per cent after the US Labour Department released the Consumer Price Index (CPI) data for December. Traders said that the outlook for the crypto asset remains bullish supported by favorable macroeconomic trends, on-chain data.

The December CPI showed a 2.9 per cent increase in line with analysts expectations. The Core CPI which excludes more volatile items like food and energy, came in slightly under expectations at 3.2 per cent. This data revealed that inflation was still a concern, but not as severe as some had feared, which helped boost investor confidence. Data suggested that the US economy was stronger-than-expected. Bitcoin’s price started at $102,000—only to dip below $93,000 after Friday’s jobs data.

Crypto prices have been showing signs of recovery from the past two trading sessions with Bitcoin up 2 per cent, Ethereum surged 2.08 per cent to $3,275. Meanwhile, the global crypto market cap saw a 2.5 per cent rise, reaching $3.37 trillion. Other major altcoins also saw significant gains on Tuesday. XRP rose 10.25 per cent, BNB gained 1.3 per cent, and Solana increased by 1.5 per cent. Dogecoin up 4.6 per cent followed by Cardano (7 per cent), Stellar (11.4 per cent), Chainlink (4.2 per cent), and Hedera (9 per cent).

A K33 report this week predicts Trump will pursue expansionary policies to extend the 2017 tax cuts and add further tax relief for working-class Americans, boosting risk assets like Bitcoin. According to the report, Trump is expected to bring forward favorable crypto policies, which, in turn, should reflect well on the crypto market.

Bitcoin’s performance this year is influenced by broader macroeconomic factors. The Federal Reserve’s stance on interest rates remains a key variable. Upcoming CPI data is likely to provide further direction, with expectations of moderating inflation supporting Bitcoin’s appeal as an inflation hedge. Potential establishment of a Bitcoin reserve could further propel Bitcoin’s price, said analysts. However potential macroeconomic headwinds, such as higher-than-expected inflation or geopolitical tensions, could dampen market sentiment.

Raj Karkara, COO, ZebPay wants the Union Budget to revisit the 30 per cent tax on crypto income and the one per cent tax deducted at source (TDS) mechanism. “Simplified tax structures can encourage wider participation while boosting liquidity and trading volumes. Recognition of crypto as a formal asset class, with clear classifications is another critical step. This clarity, coupled with robust regulatory guidelines, will not only safeguard investors but also provide a stable foundation for the industry’s growth.”