• Inflation cooled to 2.7% annually, the slowest since July, per Bureau of Labor Statistics.

• Core inflation hit 2.6%, lowest since March 2021, easing pressure on Federal Reserve policy.

• Bitcoin rose over 1% daily to $88,399; Ethereum gained similarly to $2,957 amid 26% rate cut odds.

Bitcoin and Ethereum react to cooling U.S. inflation data at 2.7%, sparking volatility and rate cut optimism. Explore how this impacts crypto markets and what it means for investors in 2025. Stay informed on key economic shifts.

How Did the Latest Inflation Data Impact Bitcoin and Ethereum Prices?

Bitcoin and Ethereum prices experienced significant volatility following the release of U.S. inflation data showing a cooler-than-expected increase. The Bureau of Labor Statistics reported that consumer prices rose 2.7% over the 12 months through November, marking the slowest annual pace since July. This figure came in lower than the 3.1% anticipated by economists, as tracked by Trading Economics, leading to an initial surge in cryptocurrency values before a pullback as markets opened.

What Caused the Volatility in Bitcoin and Ethereum After the CPI Report?

The Consumer Price Index (CPI) report, delayed due to a government shutdown affecting October data, revealed core inflation—excluding volatile food and energy—at 2.6% year-over-year, the lowest since March 2021. This development heightened expectations for Federal Reserve rate cuts, as lower inflation keeps the door open for monetary easing. Bitcoin initially climbed as high as $89,000 and Ethereum to $2,980 before U.S. markets opened, driven by optimism over cheaper borrowing costs that typically favor risk assets like cryptocurrencies.

However, as trading commenced, both assets wavered. According to CoinGecko data, Bitcoin fell 1.6% over the past week to $88,399, while Ethereum dropped 6.8% to $2,957 in the same period. Despite weekly declines, both showed slight daily gains exceeding 1%, underscoring the whipsaw nature of the market response. Zach Pandl, head of research at Grayscale, noted to COINOTAG that late December markets often face technical pressures, such as tax-related selling, which can mute positive fundamental news until the new year.

Pandl further highlighted that lower interest rates could boost demand for riskier assets through reduced borrowing costs. He also pointed to potential bipartisan progress on a digital asset market structure bill as a supportive factor, particularly for Ethereum in the coming quarter. This bill’s advancement could provide clearer regulatory frameworks, enhancing investor confidence. Earlier in the week, President Donald Trump expressed openness to nominating Democrats to the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), a move that key Senate Democrats have indicated could improve passage odds for such legislation.

Market tools like the CME FedWatch indicated a 26% probability of a quarter-point rate cut at the Fed’s next meeting, up 2% from the previous day following the CPI surprise. This shift in expectations underscores how inflation data directly influences cryptocurrency sentiment, as reduced rates historically correlate with higher crypto valuations. Historical data from previous CPI releases shows similar patterns: In instances of lower-than-expected inflation, Bitcoin has averaged a 5-7% intraday gain, though sustained rallies depend on broader economic confirmation.

Broader context reveals that inflation remaining above the Fed’s 2% target, despite cooling, continues to shape policy outlooks. The BLS data aligns with trends observed in other indicators, such as producer prices, which have also moderated. For cryptocurrencies, this environment suggests a delicate balance: While rate cut hopes provide upside, persistent above-target inflation could delay aggressive easing, capping potential rallies.

Frequently Asked Questions

What Does Cooling Inflation Mean for Bitcoin and Ethereum Investors?

Cooling inflation to 2.7% signals potential Federal Reserve rate cuts, which lower borrowing costs and encourage investment in high-risk assets like Bitcoin and Ethereum. Investors may see short-term price boosts, but volatility persists due to year-end technical factors. Long-term, this could support crypto growth if paired with favorable regulations, as noted by Grayscale’s research head.

Will the Fed Cut Rates Soon After This Inflation Data?

The latest inflation figures increase the likelihood of a rate cut, with markets now pricing in a 26% chance for the next meeting per CME FedWatch. While the data opens the door for easing in 2026, the Fed will monitor ongoing trends to ensure sustained cooling toward the 2% target before acting decisively.

Key Takeaways

• Inflation Surprise Boosts Optimism: The 2.7% CPI reading exceeded expectations, lifting rate cut probabilities and initially driving Bitcoin and Ethereum higher.
• Volatility Persists: Despite daily gains, weekly declines highlight technical market pressures like tax selling in late December.
• Regulatory Tailwinds Possible: Bipartisan efforts on digital asset bills, including SEC and CFTC nominations, could enhance Ethereum’s outlook in the near term.

Conclusion

The cooling of U.S. inflation to 2.7% has injected fresh volatility into Bitcoin and Ethereum prices, underscoring their sensitivity to macroeconomic data like CPI reports. With core inflation at its lowest in years and rate cut expectations rising, the stage is set for potential upside in cryptocurrencies, bolstered by emerging regulatory progress on digital assets. Investors should remain vigilant as markets navigate year-end dynamics, positioning for a more accommodative policy environment in 2026 that could further elevate crypto valuations.