Bitcoin up 6.7% as Euro Core CPI rises and US banking crisis drags on

Bitcoin is up 6.7% in the last 24 hours, boosted by the ongoing banking crisis in the US and persistent core inflation in the Eurozone. According to Eurostat, core inflation, i.e. excluding food and energy prices, rose to 5.6% in February from 5.3% in January.

Core inflation in the EU rose to 5.6% in February amid underlying price growth

Bitcoin rose nearly 6.7% on Friday as new consumer price index (CPI) data showed core euro zone inflation remained high in February as banking turmoil continues. The cryptocurrency stood at $26,735 at the time of writing.

Earlier today, Eurostat reported that inflation in the Eurozone fell slightly to 8.5% from 8.6% a month earlier. Eurostat said the significant fall in energy costs last month was offset by a price rise in almost all other areas as service costs continued to rise.

Core inflation, which excludes food and energy costs, rose in February to 5.6% from 5.3% in January. The Eurostat report confirmed the preliminary data published earlier in March.

The new CPI pressure comes a day after the European Central Bank (ECB) raised interest rates by a further 50 basis points (bps) to bring down record high inflation. But the central bank’s recent projections showed that underlying inflation is proving to be sticky, projecting that it will remain above the 2% target through 2025.

While overall inflation is expected to continue to moderate in the coming months due to falling energy costs, underlying price inflation may continue. For that reason, the decline in core inflation may be prolonged, according to analysts and policymakers.

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US banks’ Fed loans hit record $164.8 billion in 2023

Another factor contributing to Bitcoin’s recent rally is the deepening banking crisis triggered by the collapses of Silicon Valley Bank (SVB) and Signature Bank a week ago. The world’s largest crypto token has already breached the $26,000 mark this week amid concerns over traditional banking and the expected US inflation data.

On Thursday, banks borrowed as much as $164.8 billion from two Federal Reserve backstop facilities this week after coming under severe pressure from recent bank failures. During the discount window, banks lent $152.85 billion in the week ending March 15, breaking the previous record of $111 million set during the 2008 global financial crisis.

Now investors are anxiously awaiting how the Fed will respond to clear weaknesses in the banking sector at the upcoming policy meeting. Most economists expect the Fed to deliver a third 25 bps hike this year, although some believe it may not raise rates at all, which could bode well for crypto prices.

Could the pause in interest rate hikes lead to a significant bull run for Bitcoin? Let us know in the comments below.

About the author

Tim Fries is the co-founder of The Tokenist. He has a B. Sc. in mechanical engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate in the investment team at RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.