US CPI below expectations triggers cryptocurrency rebound, BTC back to nearly $90,000

The release of the US core CPI data below expectations directly triggered market expectations of a slowdown in inflation, thereby shaking the certainty of the Federal Reserve maintaining interest rates in January. Against this backdrop, the cryptocurrency market demonstrated independent strong performance, with BTC rebounding to nearly $90,000 (latest quote $89.95K), and ETH also regaining the $3,000 threshold (latest quote $3.02K), despite the US stock market generally under pressure and declining during the same period. This wave of gains highlights the digital assets’ sensitivity to changes in macroeconomic expectations.

Inflation Expectation Reversal Drives Decoupling of Crypto Assets

The US core CPI below market expectations led the market to adjust concerns about continued rising inflation, prompting investors to reassess the Federal Reserve’s interest rate policy direction. The previous expectation that rates would remain unchanged in January began to waver, and this policy shift opened up room for risk assets to recover. As interest rate-sensitive assets, cryptocurrencies showed a decoupling from traditional finance with a rebound strength when the Fed’s tightening expectations eased, fully reflecting the market’s positive interpretation of the inflation data.

US Stock Market Pullback and Geopolitical Tensions Double Pressure

Interestingly, after the US core CPI announcement, the US stock market instead entered a correction. This is partly due to technical retracement needs following recent large gains, and also closely related to rising geopolitical risks. Recently, Trump announced support for Iranian opposition protesters, raising concerns about escalating tensions in the Middle East. Although the crypto market and US stocks responded differently to the same geopolitical risks, both could not escape the pricing of escalating conflict risks. If the US or Israel indeed confirms military action, the pressure on risk assets could become even more pronounced.

Federal Reserve Remarks and PPI Data Build Key Outlook

Later today, the US will release Producer Price Index (PPI) data, along with statements from multiple Federal Reserve officials on policy stance. These signals will further clarify the Fed’s assessment of inflation trends, influencing market expectations for future interest rate paths. Before geopolitical tensions clear up, market volatility is expected to continue, but once uncertainties surrounding the Iran crisis dissipate, cryptocurrencies may have opportunities for technical rebounds. The coming days will be crucial to monitor the continuation of the US core CPI policy effects and whether a more sustained upward trend will form.