The cryptocurrency markets have been under the influence of various developments over the past year, primarily shaped by the Federal Reserve’s (Fed) tight monetary policy. This policy led to increased interest rates, steering investors towards less risky assets, which resulted in losses across cryptocurrencies and stocks.
Following the Fed’s halt in interest rate hikes, recent headline and core inflation data have been positive. To gauge the Fed’s progress in combating inflation, a closer look at the Personal Consumption Expenditures (PCE) data is necessary, as the institution pays significant attention to this indicator of inflation.
Expectations were set that lower-than-anticipated PCE data could trigger a market rally, while the opposite could lead to a decline. Additionally, such data could push gold prices up and weaken the dollar. A sustained decrease in PCE is also essential for potential interest rate cuts and an increase in the magnitude of these cuts in the coming year.
Today’s data revealed the following: the annual PCE was announced at 2.6% (with an expectation of 2.8%), and the core PCE came in at 3.2% (against a yearly expectation of 3.3%). These lower-than-expected figures are anticipated to have a positive impact on the market.
Bitcoin has faced significant challenges throughout the year due to the Fed’s interest rate decisions. Despite the end-of-year PCE data release, Bitcoin’s price remained stable, hovering around $43,650, even after briefly surpassing $44,000 earlier in the day.
Despite all these factors, the potential market changes following the opening of the US stock markets remain to be seen. The Fed’s positive shift in interest rate policy may pave the way for Bitcoin investors to start the new year with greater optimism.