U.S. Consumer Price Index data showed 2.7%, lower than the expected 2.9%, driving Bitcoin's price to $119,000 and Ethereum's price to over $4,400, boosting the cryptocurrency market.

The drop in inflation increases the likelihood of a Federal Reserve rate cut in September (at 82.4%), which could keep cryptocurrency prices rising, according to CME FedWatch.

After an early market decline, news of the Consumer Price Index drove the market up, with total market capitalization reaching $3.94 trillion.

The cryptocurrency market rose today, August 12, 2025, after U.S. Consumer Price Index data showed 2.7%, lower than the expected 2.9%. Bitcoin's price surpassed $119,000, Ethereum's price exceeded $4,400, and the total market capitalization increased from $3.9 trillion to $3.94 trillion.

The drop in inflation rate has raised investor optimism for the Federal Reserve to lower interest rates in September, which could push cryptocurrency prices up. Despite earlier market declines, this report led to a quick recovery for major currencies like Bitcoin, Ethereum, Ripple, and Solana.

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A decline in the Consumer Price Index raises interest rates

Expectations

The Bureau of Labor Statistics reported that the inflation rate in July remained at 2.7% year-on-year, with monthly inflation dropping from 0.3% to 0.2%. The core Consumer Price Index, excluding food and energy, rose to 3.1%, the highest level in five months, yet did not dampen market optimism.

Trading View data shows a price increase after the release, with Ethereum's price jumping from $4,172 to over $4,400, a 5% increase. Bitcoin's price reached $119,200, despite a 13% drop in trading volume, indicating a calm in trading.

The market's recovery stems from increasing chances of interest rate cuts by the Federal Reserve. The CME Fed Watch indicator shows an 82.4% probability of a 25 basis point cut in September, compared to a 17.6% chance of keeping rates steady. Low interest rates often contribute to attracting more liquidity into riskier assets, like cryptocurrencies, boosting enthusiasm.

Michelle Bowman, a member of the Federal Reserve, is pushing for interest rate cuts, citing weakness in the labor market, and even suggested three cuts this year. However, Jeff Schmid, a Federal Reserve member in Kansas City, prefers to keep interest rates steady to avoid worsening inflation.

The market experienced volatility earlier, declining before the release of Consumer Price Index data. Analysts anticipated a rise if inflation reached 2.8% or lower, which has indeed happened. With a weak labor market and stable Consumer Price Index, a rate cut seems imminent, keeping investors optimistic.

If the Federal Reserve lowers interest rates, Bitcoin, Ethereum, and others may continue to rise with the influx of funds. Cryptocurrencies are currently at their highest level, with movements from the Federal Reserve being monitored in September.