Bitcoin Surges 7.5% to $66,250 Amid Rate Cut Hopes

Bitcoin surges 7.5% to $66,250 on weak U.S. economic data, fueling Fed rate cut speculation.

By Bill Bullington

5/16, 03:11 EDT
Bitcoin / U.S. dollar

Key Takeaway

  • Bitcoin surged over 7.5% to $66,250, marking its biggest gain in nearly two months, amid expectations of global central bank rate cuts.
  • Weak U.S. economic data in April suggests the Fed may start easing monetary policy with a rate cut as early as September.
  • Central banks worldwide are shifting towards liquidity easing, positively impacting risk assets like cryptocurrencies and equities.

Bitcoin's Remarkable Surge

Bitcoin (BTC) experienced its most significant single-day gain in nearly two months on Wednesday, with a 7.5% increase to $66,250, marking the largest percentage rise since March 20. This surge came in response to weaker-than-expected U.S. economic data, which has led to increased speculation that the Federal Reserve (Fed) might cut interest rates over the summer. The leading cryptocurrency, like other risk assets, benefits from the anticipation of lower borrowing costs, as evidenced by its rally following the release of the consumer price index (CPI) and retail sales data.

Economic Data Fuels Speculation

The U.S. Labor Department's report showed a smaller-than-expected increase in the CPI for April, with a 0.3% rise compared to the 0.4% increases seen in March and February. Additionally, retail sales growth stalled in April, with a notable 0.3% month-on-month decline in the "control group" category, which is crucial for GDP calculations. These figures have significantly shifted rate-cut expectations, with Fed funds futures indicating a 25 basis point rate cut anticipated in September. This shift towards a more dovish monetary policy stance is not limited to the Fed, as markets also expect rate cuts from the Bank of England (BOE) and the European Central Bank (ECB) in June.

Global Central Banks' Pivot

The pivot towards monetary easing by central banks worldwide is a bullish signal for risk assets, including cryptocurrencies. Data from MacroMicro highlights a decreasing trend in the percentage of global central banks that have recently hiked rates, contrasted with an increasing percentage of those cutting rates. This trend suggests an improving liquidity environment, which, according to broking firm Pepperstone, should bolster equities and encourage investors to engage more with risk assets. Owen Lau, an analyst at Oppenheimer, noted that the lighter-than-expected CPI number modestly increased the likelihood of a rate cut, which remains a significant influencer for bitcoin prices.