Bitcoin experiences a surge in value after the release of underwhelming US economic data.

Bitcoin (BTC) witnessed a substantial surge on May 15, experiencing its most significant single-day rise in nearly two months. The cryptocurrency surged over 7.5% and reached $66,250. This surge was attributed to weak US economic data, which increased the likelihood of the Federal Reserve (Fed) cutting interest rates in September. As borrowing costs for fiat currencies decrease, alternative investment vehicles like altcoins become more appealing, leading to a significant rise in Bitcoin and other risk assets.
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Fed Anticipated to Cut Interest Rates by 25 Basis Points
Other Central Banks Also Preparing for Rate Cuts
Fed Anticipated to Cut Interest Rates by 25 Basis Points
On May 15, the US Department of Labor released data indicating that the consumer price index (CPI) had risen less than expected in April. This suggests a decrease in living costs in the US, with the headline CPI rising by 0.3% in April compared to 0.4% in March and February. The core CPI, which excludes volatile food and energy prices, also increased by 0.3% in April compared to a 0.4% rise in March. These figures indicate a potential easing of inflationary pressures. Access
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Alongside the CPI data, US retail sales figures for April also disappointed. Headline retail sales growth stalled, and the “control group” category used in GDP calculations experienced a monthly decline of 0.3%. These weak economic indicators significantly shifted market expectations towards a Fed rate cut. Investors now anticipate a 25 basis point interest rate cut by the Fed in September, aligning with the summer period from June 20 to September 22. The Fed has also indicated a slowdown in quantitative tightening measures, which will further ease liquidity constraints starting in June.
Other Central Banks Also Preparing for Rate Cuts
The expectation of rate cuts extends beyond the Fed. Market participants also anticipate the Bank of England (BOE) and the European Central Bank (ECB) to lower interest rates in June. Additionally, the Swiss National Bank (SNB) and Sweden’s Riksbank have already reduced their benchmark borrowing costs. This global shift towards monetary easing benefits risk assets like Bitcoin and altcoins as it increases market liquidity.


Data from MacroMicro, a website that tracks market data, confirms this trend. The percentage of global central banks raising interest rates has decreased, while the percentage lowering them has increased. This shift indicates that more central banks are moving towards rate cuts, which could enhance market liquidity. According to MacroMicro, higher rates of interest rate cuts by central banks generally lead to improved market liquidity, while lower rates indicate tighter liquidity conditions.
Brokerage firm Pepperstone also supports this view, suggesting that the likelihood of increased liquidity over the summer will support equities. As a result, investors will have more confidence to engage in higher-risk investments, with Bitcoin and altcoins being the primary beneficiaries. The anticipation of easier monetary policies from major central banks creates a favorable environment for Bitcoin and altcoins, as evidenced by the significant price increases observed on Wednesday.
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Disclaimer:
The information provided in this article should not be considered as investment advice. Investors should be aware that cryptocurrencies carry high volatility and risk and should conduct their own research.