Amid optimistic investor sentiment, Bitcoin surged past $66,000 on Friday, driven by positive inflation news and substantial inflows into spot Bitcoin exchange-traded funds. The cryptocurrency soared more than 2% in the latter part of the week, reaching a high not seen since late July, as the inflation rate for August came in lower-than-expected.
Bitcoin Peaks on Positive Inflation Data
Bitcoin briefly peaked at around $66,500 before settling near $66,000 on Friday. Ethereum also experienced a notable rise, increasing from $2,644 to $2,699 within forty-five minutes on Friday morning. The upward movement in the cryptocurrency market is fueled by multiple factors.
This morning, the U.S. Bureau of Economic Analysis released the Personal Consumption Expenditures (PCE) Price Index for August 2024, a key indicator of inflation in the U.S. economy. The report indicated that inflation slowed to 2.2% from 2.5% in July, marking the lowest rate since 2021. This lower-than-expected inflation data supports the Federal Reserve’s recent decision to ease monetary policy by reducing interest rates by 50 basis points.
Massive Inflows into Bitcoin ETFs
Besides inflation, significant capital inflows into spot Bitcoin ETFs are another contributing factor. On Thursday, spot Bitcoin ETFs saw massive inflows totaling $365 million, the largest since July 21, according to SoSoValue data. ARK Invest’s 21Shares Bitcoin ETF led with net inflows of almost $114 million, while BlackRock’s iShares Bitcoin Trust and Fidelity’s Wise Origin Bitcoin Fund followed with $93 million and $74 million, respectively. Grayscale Bitcoin Trust, on the other hand, experienced outflows of nearly $8 million. Since the SEC approved these ETFs in January, the sector has accumulated a whopping $18 billion, with the highest daily net inflows recorded in March.
Influences from China’s Economic Changes
Recent changes in China’s economic policy have also played a role in Bitcoin’s rise. The People’s Bank of China (PBOC) recently considered injecting up to 1 trillion yuan ($142 billion) into its largest state-owned banks to stimulate the slowing economy. Additionally, the PBOC announced a 50 basis points cut in interest rates on loans to commercial banks. Bitcoin’s price has shown a positive correlation with the PBOC’s balance sheet over the past 30 days, highlighting the influence of these monetary and financial decisions on cryptocurrency price movements.
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