Ether at Two-Month High After U.S. Inflation Cools

U.S CPI Dropped To 8.5% In July.

Crypto markets have reversed earlier losses and are rallying after softer than expected Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics.

Inflation in the U.S. dropped to 8.5% in July, according to the Aug. 10 report. Economists polled by Reuters had predicted a reading of 8.7% a reduction from last months 9.1%, but a far cry from the Feds target of just 2%.

Ether surged 8.9% to $1,850, the highest level since June 9. Bitcoin is up 3.7% to 24,000.

DeFi stalwarts UNI and AAVE are up more than 13% in the past 24 hours.

The ETH/BTC ratio stands at 0.0769, a three-month high, as investors continue to favour the second-largest cryptocurrency by market capitalization ahead of the Merge, Ethereums transition to an eco-friendly proof-of-stake consensus mechanism. 

Fed Hikes

The issue of increasing inflation has dominated financial news in recent months, with the Federal Reserve hiking interest rates and the Biden administration introducing new taxes as part of the Inflation Reduction Act in a bid to curb inflation.

After the U.S. central bank indicated at its July meeting that it would consider further interest rate hikes based on economic data, cooling inflation numbers could mean a smaller increase in September. Indeed, the market is already pricing in a 0.5% hike rather than 0.75% after the data was released.

Bear Market

Increasing interest rates and deteriorating macroeconomic conditions have been cited as a major contributing factor to the brutal Q2 2022 crypto downtrend. Reduced risk appetite among investors is believed to have contributed to Ethereum shedding more than 70% of its value to briefly trade below $1,000, according to The Defiant Terminal.

The combined capitalization of DeFi assets is up nearly 5% to $53.2B. Some of the days top gainers include decentralized options exhange Dopex which is up 48%, and liquid staking protocol Lido which rose 18.4%.