Bitcoin and Ethereum experienced a burst of volatility on Thursday after fresh U.S. inflation data showed that consumer prices rose more slowly than expected last month, briefly reviving optimism around future interest rate cuts. The initial reaction was upbeat, but gains proved uneven as traders weighed the broader economic backdrop and year-end market dynamics.
According to delayed figures from the U.S. Bureau of Labor Statistics, inflation eased to an annual rate of 2.7% in November, marking its slowest pace since July. Economists had been expecting a higher reading of around 3.1%, making the data a notable surprise. Core inflation, which excludes food and energy prices, also cooled to 2.6% year-on-year, its lowest level since early 2021. While inflation remains above the Federal Reserve’s long-term target of 2%, the softer data strengthened expectations that policymakers could lean towards rate cuts in 2026.
Cryptocurrencies reacted swiftly. Bitcoin climbed towards $89,000 in early trading, while Ethereum surged close to $2,980 before U.S. equity markets opened. However, once Wall Street began trading, both assets lost momentum and swung lower, reflecting profit-taking and cautious positioning. Despite the pullback, Bitcoin and Ethereum were still modestly higher on the day, each posting gains of just over 1%.
Over a longer horizon, the picture remains mixed. Bitcoin was down about 1.6% over the past week, trading around $88,400, while Ethereum had fallen nearly 7% to roughly $2,960. The contrast highlights how sensitive crypto markets remain to short-term macro signals, particularly as liquidity thins toward the end of the year.
Analysts suggest that inflation data alone may not fully explain the market’s choppy response. Zach Pandl, head of research at asset manager Grayscale, noted that late December is often dominated by technical factors rather than fundamentals. Tax-related selling and portfolio rebalancing can dampen the immediate impact of positive economic news, meaning that any sustained upside may only emerge in the new year.
Looking ahead, Pandl argued that a combination of lower interest rates and regulatory progress could prove supportive, especially for Ethereum. Cheaper borrowing costs typically encourage investment in riskier assets, and recent bipartisan movement on a U.S. crypto market structure bill has raised hopes for clearer regulatory rules. President Donald Trump has also indicated a willingness to appoint Democratic commissioners to key financial regulators, a step seen as crucial for advancing the legislation, though scepticism remains among some lawmakers.
In the rates market, expectations shifted modestly following the inflation surprise. Traders now see a roughly one-in-four chance that the Federal Reserve will cut rates by 25 basis points at its next meeting, a slight increase from earlier projections. While that probability remains far from certain, it underscores how even small changes in inflation data can ripple quickly through both traditional and digital asset markets.
