On Tuesday, the Bitcoin price plunged from $49,900 to $48,300 following the release of the US inflation data. As NewsBTC reported, the data came in hotter than expected. Instead of 2.9%, headline CPI came in at 3.1%, while the core CPI was even at 3.9% instead of the expected 3.7%.
The traditional financial market reacted negatively and dragged Bitcoin down with it, as expectations for interest rate cuts have shifted further into the future. The prediction markets are now pricing in only 4 rate cuts in 2024 after CPI inflation reached 3.1% in January.
This is a huge drop in expectations as just over a month ago the markets were still pricing in 6 rate cuts. The Fed’s most recent forecast was for 3 rate cuts in 2024. The probability of a rate cut in March is below 10% and the probability of a rate cut in May is falling rapidly.
In contrast to the S&P 500, however, the Bitcoin price showed a strong reaction and quickly rose again to $49,900. The reaction of the Bitcoin market is quite telling for the short-term future. And the Bitcoin price is showing just that today. At press time, BTC rose above $51,500, marking a new yearly high. Here are 4 key reasons:
#1 Record-Breaking Bitcoin ETF Inflows
The surge in Bitcoin ETF inflows marks a pivotal moment for Bitcoin, reflecting a significant shift in investor sentiment and market dynamics. On a record-breaking day on Tuesday, the net inflows into spot Bitcoin ETFs reached $631 million, led by The Nine with an inflow of $704 million, signaling a substantial accumulation of Bitcoin.
Key players like Blackrock and Fidelity played a significant role in this influx, with Blackrock experiencing nearly half a billion dollars ($493 million) in inflows and Fidelity $164 million. The overall net inflow of $2.07 billion over four trading days, averaging over half a billion per day, highlights the staggering sustained demand for Bitcoin.
This demand is notably new capital, as GBTC outflows remained stable at $73 million, indicating these inflows are not merely a rotation from GBTC but represent fresh investments. Matt Hougan, CIO of Bitwise emphasized the significance of this movement:
IMHO the [numbers] undercounts the fundamental new investor demand for these ETFs. People assume all of the money flowing out of GBTC to date is rotating into other bitcoin ETFs. But a good chunk of it is from inorganic holders […] Long-term investors have…
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