January CPI came in below expectations at 2.4% year-over-year, sparking a Bitcoin rally past $68,000 and renewed bets on Fed rate cuts.
A cooler-than-expected US inflation print has given crypto markets a much-needed boost, with Bitcoin surging 3% within minutes of the release.
The US Bureau of Labor Statistics reported January CPI at 2.4% year-over-year, undershooting the consensus estimate of 2.5%. The monthly headline came in at 0.2%, below the expected 0.3%. It marks the lowest annual inflation reading in over four years, bringing the figure closer to the Federal Reserve's 2% target.
Bitcoin responded immediately, surging from around $66,600 to as high as $68,500 before settling near $67,500. Ethereum also gained ground, rising alongside the broader crypto market. Prior to the release, crypto had been under pressure, with the S&P 500 down 1.57% and the Nasdaq off 2.03% during the previous session.
The softer CPI reading has reignited expectations for Federal Reserve rate cuts, with traders now pricing in potential action as early as March. Lower interest rates reduce the opportunity cost of holding non-yielding assets like Bitcoin, making risk assets more attractive.
This comes at a critical time for crypto. Bitcoin has dropped roughly 47% from its all-time high of $126,000 reached in October 2025, and spot Bitcoin ETFs have seen over $5.7 billion in net outflows since November. The inflation data offers a potential catalyst for reversing that trend, though Standard Chartered recently lowered its year-end Bitcoin target from $150,000 to $100,000.
Key levels to monitor include $68,000 resistance, which aligns with Bitcoin's 200-week exponential moving average, and $65,000 support. If the Fed signals a March rate cut at its next meeting, Bitcoin could retest $70,000. However, continued ETF outflows and macro uncertainty remain headwinds. The Fear and Greed Index has slipped further into "Fear" territory, suggesting sentiment remains fragile despite the positive inflation print.
The CPI surprise provides temporary relief for a battered crypto market. Whether this bounce has legs will depend on follow-through from institutional buyers and clearer signals from the Federal Reserve on the timing of rate cuts.
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