Bitcoin Breaks $25K as U.S. Inflation Slowed to 6% in February

February inflation in the U.S. dropped to 0.4% from 0.5% in January, in line with economists' estimates, the Bureau of Labor Statistics (BLS) said Tuesday.

On a year-over-year basis, inflation slowed to 6.0% from 6.4% the month before, also in line with estimates.

The core rate of inflation – which strips out food and energy costs – increased by more than forecast to 0.5% in February versus 0.4% in January, and against forecasts for 0.4%. The year-over-year core rate was 5.5%, as expected, compared with 5.6% in January.

The bitcoin price (BTC) rose to a nine-month high of $25,484 in the minutes following the report. The world's largest cryptocurrency by market cap then extended the advance, surpassing the $26,000 mark for some time before recently settling back to the $25,500 range.

Inflation concerns have become secondary over the past few days as investors, the government and the Federal Reserve have had to deal with the possible systemic implications of multiple bank failures.

Less than one week ago, traders had been betting the Fed would hike the benchmark fed funds rate by 50 basis points at its March meeting. Following the collapse of Silicon Valley Bank on Friday and the shutdown of Signature Bank over the weekend, traders quickly pivoted and are now pricing in only the slimmest chance of any rate hike in March and rate cuts by mid-summer.

“The macro backdrop is transitioning from that of tightening to significant loosening, or at least this is what the market is predicting," Bob Ras, co-founder of Sologenic, a blockchain-powered network for tokenizing securities, wrote CoinDesk in an email. "Bitcoin and digital assets tend to lead the way in terms of anticipating these kinds of macro shifts, and this is why we’re seeing a pronounced rally in the crypto market."

Ras noted that the CPI was falling and that "liquidity injections to shore up the banking sector are having an effect similar to that of quantitative easing."

"The conditions for a sustained rally for Bitcoin and other digital assets are ripening – and, indeed, these conditions of banking instability and resulting monetary turbulence are exactly why Bitcoin was created in the first place,” he said.

UPDATE (March 14, 2023, 12:55 UTC): Adds chart, 24-hour bitcoin performance.

UPDATE (March 14, 2023, 13:16 UTC): Updates bitcoin's price performance.

UPDATE (March 14, 2023, 16:42 UTC): Adds Ras quote.