Bitcoin, IOTA, XRP, and several other cryptocurrencies surged on Tuesday as investors reacted positively to a significant US inflation report. Bitcoin's price exceeded $96,000, while IOTA and XRP rose to $0.3513 and $2.70, respectively. The total market capitalization of all cryptocurrencies increased by 5.2% to $3.37 trillion.
The price gains followed the release of the latest US Producer Price Index (PPI), which came in lower than expected. The PPI figures were at 0.2%, compared to a median forecast of 0.4%. The core PPI, excluding volatile food and energy items, dropped from 0.2% to 0.0%.
Investors are now looking ahead to the Consumer Price Index (CPI) data set to be released on Wednesday, which will provide further insights into the Federal Reserve's future actions. Economists anticipate that inflation remained elevated in December, a trend possibly influenced by ongoing issues in Los Angeles and previous policies.
The main CPI is expected to be at 2.9%, the highest level in eight months, while core inflation is projected at 3.3%, significantly above the Fed's target of 2.0%. Should the official statistics meet or exceed expectations, it could indicate a tighter stance from the Fed.
Analysts from major banks have adjusted their expectations regarding the Fed's actions. ING Bank now predicts only two rate cuts instead of three, while Bank of America sees no rate cuts this year. Analysts noted, "After the stronger-than-expected December jobs report, we have revised our Fed forecasts: We expect no additional rate cuts. Inflation remains above target, with risks creating upward pressure. Economic activity is strong, and the labor market appears stable."
Typically, cryptocurrencies suffer under a tight Fed policy, as such a stance leads to higher bond yields and a shift from riskier assets to money market funds. This explains recent declines in Bitcoin and other altcoins as bond yields reached multi-year highs.
Another potential catalyst for Bitcoin and altcoins like IOTA and XRP is the start of the earnings season on Wednesday. Notable companies reporting include BlackRock and major banks such as Goldman Sachs and JPMorgan.
BlackRock, in particular, is a key player to watch, having become a major player in crypto custody services. Statements from CEO Larry Fink could significantly influence crypto prices. Additionally, several companies may announce their crypto strategies during this earnings season.
The outcomes of the earnings reports will also impact crypto prices, depending on their performance. A strong earnings season could boost stock prices, which in turn may affect other risky assets like cryptocurrencies.