Markets Surge After Data Shows US Inflation Cooling

GBTC Discount Shrinks To 39%

Crypto prices are rising along with stock markets after the latest report from the US Bureau of Labor Statistics showed that consumer prices fell in December. 

The year-on-year Consumer Price Index (CPI), a measure of annualized inflation, dropped to 6.5% from 7.1% in November.

Bitcoin, already having a good week, is turning it into a great one with an 8.4% jump in the last 24 hours, according to The Defiant Terminal. ETH, BNB, and XRP, the top non-pegged digital assets after Bitcoin, are also rallying, though not as much as the world’s oldest cryptocurrency — ETH is up 7.1%, BNB is up 3.2%, and XRP 1.5%.

ETH Price + BTC Price + BNB Price + XRP Price, Source: The Defiant Terminal

GBTC Discount Shrinks

Despite the ongoing battle between crypto exchange Gemini and Digital Currency Group (DCG), GBTC has curiously surged even more than Bitcoin — the beleaguered security, which represents a share in an underlying pool of Bitcoin, jumped almost 12% on the day.

GBTC is a publicly-traded investment fund issued by Grayscale, a subsidiary of DCG. Because of the structure of the investment vehicle, the security doesn’t trade one-to-one with the underlying Bitcoin it represents. 

Instead, GTBC floats at a premium or discount relative to the underlying BTC based on market demand for its shares — GBTC’s discount to its Net Asset Value (NAV) hit an all-time high of nearly 50% in December.

Notably, traditional stock markets are also up on the CPI news, indicating that crypto continues to be just another risk-on trade in the current macro environment and is not meaningfully differentiated from equities. 

Annualized inflation in the United States hit a high of 9.1% in June 2022 and has been edging lower since. 

Lido Leads DeFi Higher

The DeFi tokens of the top protocols in terms of total value locked (TVL) have also taken a leg up. Leading the charge is Lido, one of a red hot set of liquid staking protocols — LDO is up a whopping 19.4% on the day, according to The Defiant Terminal.

MKR Price + LDO Price + UNI Price + AAVE Price + CRV Price, Source: The Defiant Terminal

Next Fed Meeting

The Fed’s next meeting will take place on Feb. 1, and the CME Group’s FedWatch tool indicates a 92.2% chance of a 25 basis point hike.

The Bureau of Labor statistics’ next release of CPI data, which will reference January prices, will come out on Feb. 14.