A surprise softening in U.S. inflation data sent Bitcoin and Ethereum higher, but investors remain wary amid a climate of extreme fear and regulatory scrutiny.

What Happened

The latest Consumer Price Index (CPI) released on December 12th showed a 0.4% month‑over‑month increase, below the 0.6% forecast. The year‑over‑year CPI rose 3.5%, still above the Federal Reserve’s 2% target. The softer reading lifted sentiment for risk assets, with Bitcoin up 4% and Ethereum 5% in the first 24 hours.

Why It Matters for Bitcoin

Inflation is a key lever for the Fed’s policy decisions. A softer CPI suggests the Fed may pause rate hikes, which tends to lower borrowing costs and improve risk appetite. However, the Fear & Greed Index remains at 16—extreme fear—indicating that investors are still cautious about market volatility. Bitcoin’s price reaction shows the asset’s sensitivity to macro signals and the ongoing search for a safe‑haven alternative.

U.S. Angle

In the United States, the Securities and Exchange Commission (SEC) is reviewing several spot‑Bitcoin ETF proposals. A favorable ruling could broaden institutional exposure and add liquidity to the market. Meanwhile, the Federal Reserve’s minutes and the next CPI release will be closely watched for clues on whether the Fed will keep rates steady or continue tightening. The U.S. dollar’s strength also plays a role, as a weaker dollar often supports higher crypto prices.

What to Watch Next

  • Federal Reserve minutes (scheduled for December 19th)
  • Next month’s CPI data (December 19th)
  • SEC decisions on pending Bitcoin ETF filings
  • U.S. dollar index movements

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Source

Original article: Decrypt