- Bitcoin jumped 8% on Thursday, topping $18,800 and notching a two-month high.
- The rally came after key inflation data raised hopes for a more favorable macro environment ahead.
Bitcoin hit a two-month high on Thursday as fresh signs that inflation is slowing down more than offset a slew of grim crypto industry news.
The largest cryptocurrency climbed 8% over the past 24 hours to trade around $18,856, according to Messari.
Early Thursday, Consumer Price Index (CPI) data for December indicated that inflation pressures eased again, giving Federal Reserve officials leeway to slowdown rate hikes.
Prices were up 6.5% from a year ago, marking the sixth straight month that annual inflation has cooled as it continues to come off a high of 9.1% in June.
Favorable inflation data ought to boost token prices and could "help the market cement [its] current rebound," said Wael Makarem, Senior Market Strategist at financial services firm Exness.
"Overall, cryptocurrencies could find better conditions this year if the Federal Reserve moves toward a softer monetary policy," Makarem added. "The market is pricing in the possibility of interest rates in the US to stabilize and eventually start declining this year, which if happened, could fuel more risk-taking among investors in crypto markets and other risky assets."
Caleb Franzen, founder of research firm Cubic Analytics, said that crypto investors are "snapping back and becoming buyers" after "sentiment and positioning reaching extreme levels" late last year.
"Risk assets are celebrating the continued deceleration in the YoY rate of change in inflation and the first month of a MoM decline in consumer prices," Franzen told Insider. "Fed officials are voicing that +0.75% rate hikes are in the rear-view mirror, likely to go forward with +0.25% hikes in future meetings."
However, the nascent space isn't in the clear yet and has a long road to recovery. Crypto's market capitalization is off over two-thirds from its record highs, according to Messari, with bitcoin and ethereum down over 70% since November of 2021.
"While it's too early to count chickens, the price action since yesterday has been encouraging," Andy Long, CEO of crypto mining company White Rock Management, told Insider. "Bear markets tend to end when folk least expect and there are signs of capitulation over the last few weeks."
Long added: "I'm cautiously optimistic we've turned the corner and begun the slow march towards the bullish halving in 2024."
Crypto markets endured a lengthy bear market through 2022.
The Federal Reserve's attempt to combat decades-high inflation turned traders away from riskier bets like crypto. The collapse of Sam Bankman-Fried's FTX, algorithmic stablecoin TerraUSD, and Three Arrows Capital led to mass liquidations and weighed on investor sentiment as well.
All eyes are on embattled crypto conglomerate Digital Currency Group, which some predict may be the next shoe to drop in the industry. For now, however, markets seem to be shrugging off the firm's financial woes.
Bitcoin and ethereum are ahead 12% and 14% in the past week, respectively.