Bitcoin (BTC) has risen to $21,550 early Wednesday, surpassing the level at which it stood on Nov. 5 last year just prior to the collapse of crypto exchange FTX. According to CoinDesk data, the price of bitcoin is now at its highest since mid-September.
Behind today‘s advance were this morning‘s larger than expected decline in the Producer Price Index (PPI) for December combined with a bigger than forecast drop in December retail sales.
The PPI fell 0.5 in December, bringing the year-over-year rate down to 6.2 versus 7.3 previously. Market expectations had been for just 0.1 dip in December and a year-over-pace of 6.8. The core PPI for December fell 0.1, in line with forecasts, but the year-over-year rate fell to 5.5 versus expectations for 5.7.
December retail sales fell 1.1 versus forecasts for just a 0.8 decline. Combined with a drop of 1 in November, this marks the first back-to-back 1+ declines in monthly retail sales since the pandemic panic.
A check of traditional markets finds the 10-year U.S. Treasury yield down a whopping 12 basis points to 3.38, its lowest since mid-September, and well below the current Fed Funds rate target of 4.25-4.5. This sort of "inversion" has typically been an excellent forecaster of a recession, or at least a sizable economic slowdown. Should that come to pass, it would surely mean easier monetary policy than currently forecast, a possible boon to risk assets, including bitcoin.
Trading in the low-$21,000 area in early November 2022, bitcoin had plunged nearly all the way down to $15,000 later that month in wake of the FTX bankruptcy. The crypto then remained stuck close to $16,500 for several weeks before embarking on this current rally in early 2023.
