Good sign for Bitcoin: US inflation falls below expectations

The recent drop in inflation in the United States is being seen as a good sign for the cryptocurrency market, especially for Bitcoin (BTC). According to the US Department of Labor, the consumer price index (CPI) increased by just 0.25% in August 2024. This is slightly lower than the expected 0.26%.

This result puts inflation at its lowest level in the last three years. In addition, it opens speculation about a possible reduction in interest rates by the Federal Reserve (Fed) at its meeting on September 18.

This drop in inflation is considered by many analysts as a potential catalyst for Bitcoin’s appreciation in the medium term. This is because, in a scenario of interest rate cuts, the financial market tends to react with a greater appetite for higher-risk assets, such as cryptocurrencies.

Relationship between interest rate cuts and Bitcoin

Lower interest rates in the United States could have a positive impact on the price of Bitcoin for several reasons. First, lower interest rates reduce the cost of credit, encouraging investors and businesses to seek financing. This capital, in turn, is often directed towards investments that offer higher returns, such as stocks and cryptocurrencies.

Furthermore, falling interest rates also reduce the attractiveness of US Treasury bonds, which are considered one of the safest investment options but with low yields in periods of low interest rates.

As a result, investors are starting to look for more profitable alternatives, such as Bitcoin, which, despite being volatile, has the potential to offer significantly higher returns.

Another important aspect is that lower interest rates generally weaken the local currency — in this case, the dollar. A weaker dollar makes assets denominated in the US currency more attractive to international investors. This can generate an influx of capital into Bitcoin, boosting its price.

While falling inflation is good news for the financial market and potentially for Bitcoin, it is important to remember that the cryptocurrency tends to react with volatility in both directions. After the inflation announcement, Bitcoin was trading around $56,000, showing a slight drop.

“Despite the volatility, the current scenario could be a window of opportunity for investors looking to profit from the expectation of a US interest rate cut. If the Fed chooses to reduce rates, Bitcoin could experience a significant rise, attracting even more interest from global investors,” points out analyst Nicolás Antiporovich.