Bitcoin (BTC) and the broader cryptocurrency market saw modest gains on Wednesday, following news of U.S. President Donald Trump’s diplomatic efforts to mediate the Russia-Ukraine conflict. The rally marks a recovery from earlier losses triggered by stronger-than-expected U.S. inflation data, which pushed prices higher and reignited concerns over future interest rate hikes.
The U.S. Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) increased by 0.5% in January, surpassing the forecasted 0.3% and December’s 0.4%. Year-over-year, CPI rose 3.0%, exceeding expectations of 2.9%, while core CPI, which excludes volatile food and energy prices, climbed 3.3%, up from 3.2% in December and above the expected 3.1%.
This higher-than-expected inflation prompted market participants to scale back expectations for Federal Reserve rate cuts, now pricing in just one rate reduction for 2025, followed by a Fed pause until 2026. Risk assets like Bitcoin, which thrive in a low-interest-rate environment, initially saw a pullback as investors adjusted their outlook.
However, sentiment in the crypto market shifted positively after President Trump revealed he had engaged in discussions with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskyy to explore a resolution to the ongoing war. News of these talks led to an immediate rebound in Bitcoin and altcoins, signaling investor optimism over the potential for a peaceful resolution.
The Russia-Ukraine war, which contributed to the 2022 crypto bear market, has weighed heavily on market sentiment. A potential end to the conflict could pave the way for a full recovery for Bitcoin and other cryptocurrencies, particularly after the recent market downturn that occurred in early February.
In the past 24 hours, Bitcoin rose above $97,000, inching closer to the psychologically significant $100,000 mark. This move mirrors the growing correlation between Bitcoin and traditional markets, as evidenced in 2024. The S&P 500 also saw a slight recovery following earlier declines.
Altcoins experienced a similar boost, with XRP, BNB, Cardano, and Dogecoin gaining 2%, 9%, 3%, and 5%, respectively. Additionally, sectors like Artificial Intelligence (AI) tokens also saw significant gains, with Near Protocol (NEAR) and Internet Computer (ICP) rising by 6% and 5%, respectively.
With Trump continuing to focus on policies that could positively impact the crypto industry, such as his executive orders aimed at establishing a more favorable regulatory environment, investor sentiment remains bullish, despite inflationary concerns. If diplomatic efforts continue to progress, the crypto market may continue to benefit from renewed optimism in the coming months.
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