Bitcoin has regained strength above the $64,000 level after US inflation data showed price pressures easing.
At the time of writing, Bitcoin was at $64,732, down 0.03% since it opened early Wednesday in Asian trading.
The development boosted investor confidence that the US Federal Reserve (Fed) is expected to keep interest rates on hold at its next monetary policy meeting.
Consumer Price Index (CPI) data for June showed consumer prices fell 0.4% from the previous month.
The decline was much better than market expectations of a 0.1% decline.
On an annual basis, inflation also slowed to 3.5%, marking the first decline in five months.
Following the announcement, Bitcoin prices rose by around 2.3% to $64,300, while Ethereum recorded a stronger increase of 5.4% to around $1,890.
The decline in inflation was driven by falling energy prices, which managed to offset rising food and housing costs.
This signaled that inflationary pressures in the United States were easing.
In addition, core inflation or Core CPI, which excludes food and energy prices, also fell to 2.6% from 2.9% in the previous month.
This data further reinforced expectations that the Fed will not need to act aggressively to raise interest rates in the near future.
Expectations of looser monetary policy usually benefit risky assets such as Bitcoin and Ethereum as investors are more likely to seek higher returns than keeping funds in fixed-income instruments.
Despite the improved market sentiment, investors remain cautious about geopolitical developments in the Middle East.
The conflict involving the United States, Israel and Iran continues to raise concerns about global energy supplies, which could cause oil prices to rise again and put new pressure on inflation.
The market now expects the Fed to maintain interest rates in the range of 3.5% to 3.75% at this month's meeting.
However, the possibility of a 0.25 percentage point interest rate hike in September cannot be ruled out if inflationary pressures rise again.
Analysts also believe that Bitcoin's outlook remains positive if the conflict in the Middle East does not worsen.
The combination of slowing inflation and more stable monetary policy is seen as able to support the upward momentum of the crypto market in the coming months.
