Bitcoin recovers from overnight declines, climbing back above $70,000 as oil prices continue to fall.

The U.S. inflation figures released on Wednesday morning matched expectations, leading markets to further eliminate the possibility of a Federal Reserve rate cut during the upcoming March or April meetings.

Bitcoin rises in early U.S. trading (Yashowardhan Singh/Unsplash)

Key points:

• After trading lower for most of Wednesday morning in the U.S., bitcoin surged back above $70,000, making its move as oil experienced a rapid decline of $3 per barrel.
• The ongoing conflict with Iran has seemingly influenced crude oil prices and, consequently, market behavior this week.
• The February U.S. inflation data matched expectations, reinforcing market predictions that there will be no rate cuts by the Fed in the forthcoming March or April meetings.

Following a drop back to the vicinity of $69,000 during the early hours of U.S. trading on Wednesday, bitcoin BTC$69,593.87 swiftly rose to nearly $71,000.

Other cryptocurrencies, such as ether (ETH), solana (SOL), and XRP, experienced similar sharp upward movements.

The gains appeared to coincide with a rapid reversal in crude oil prices, which dropped $3 per barrel in just a few minutes. As of the time of writing, WTI crude futures for April were priced at $85, reflecting a 2% increase for the day.

The decline in crude oil also positively impacted stocks, with the Nasdaq shifting from a slight decline to a 0.5% gain during early U.S. trading.

Shares related to cryptocurrency displayed mixed performance, with Strategy (MSTR), Galaxy Digital (GLXY), and Bullish (BLSH) showing modest increases, while Coinbase (COIN) and eToro (ETOR) experienced slight decreases.

This week, risk markets have largely been dictated by the fluctuations in oil prices due to the ongoing conflict with Iran. Stocks and cryptocurrencies saw a drop on Sunday evening as oil prices surged to $120, but subsequently rebounded as oil fell back.

New inflation data

The February CPI report released on Wednesday aligned with economist predictions, rising by 0.3% month-over-month and establishing a 12-month inflation rate of 2.4%. However, next month’s data could present a significantly different scenario due to the outbreak of the U.S.-Iran conflict, raising the question of whether the Federal Reserve will react to this temporary disruption or adopt a more aggressive approach following the previous inflation cycle.

Stephen Coltman, the head of macro at 21shares, stated that the Fed’s decision will be crucial, emphasizing that investors will closely monitor next week’s Fed meeting for indications of how officials intend to respond.

Regarding bitcoin, he mentioned that the anticipated rise in next month’s data is likely “already baked in the cake.”