Bitcoin price jumped to its highest level of the year as the encouraging U.S. inflation data set off hopes for future interest rate cuts by the Federal Reserve.
The cryptocurrency traded above $100,000 during early Thursday in Asia, a dramatic bounce from recent volatility. Earlier this week, the Bitcoin price slipped below $90,000, the lowest since mid-November, in a wild swing typical for the asset.
The latest rally had come after the Bureau of Labor Statistics reported a better-than-expected Consumer Price Index. The softer-than-expected inflation has added to expectations that the Federal Reserve could loosen its monetary policy earlier than initially expected.
When interest rates go down, investment usually flows into higher-risk assets like cryptocurrencies since investors are looking for better yields as Treasury yields go down. To market participants, this is a potential policy shift that has proved beneficial for digital assets, especially Bitcoin, which has garnered increased attention as a speculative and alternative asset class.
Speculation about regulatory and policy changes under the incoming Trump administration also adds to the momentum. President-elect Donald Trump is scheduled to assume office on January 20, and his incoming administration is expected to propose measures that could favour the cryptocurrency sector.
Trump has expressed support for making the United States the world's hub of digital assets, even going as far as to suggest a national Bitcoin reserve.