Happy Valentine’s Day, crypto fam! If you’re flying solo today and staring at charts instead of candlelit dinners, congrats, because you just earned some extra uninterrupted time to dive into this important update on inflation cooling to 2.4% and what it could mean for rate cuts and your altcoin dreams. 🥰 😁
The latest US economic data brings a more encouraging tone for those hoping for eventual Fed easing. The January 2026 jobs report (released February 11) shows the unemployment rate eased slightly to 4.3% from 4.4% in December. This is better than expected, with payrolls adding a solid 130,000 jobs.
Even more positively, the January CPI report (released yesterday) showed headline inflation cooling to 2.4% YoY (down from 2.7% in December), its lowest since May 2025. 🍻 Core CPI dipped to 2.5% YoY, with monthly gains modest at 0.2%. Energy prices fell, and shelter pressures eased slightly, which is clear progress toward the Fed’s 2% target.
As retail crypto investors, this combo sparks the key question: Could this nudge us closer to rate cuts and a risk-on environment for altcoins, or do we stay defensive in Bitcoin and tokenized gold?
Quick take: This is genuinely more bullish than the prior picture. Lower unemployment signals labor resilience (not weakness forcing panic cuts), but the sharper-than-expected inflation drop gives the Fed more room to ease if the trend holds sustainably. With the federal funds rate steady around 3.64% effective (no change post-January hold), real interest rates remain positive (~+0.8–1.0% using headline CPI), but continued disinflation could push them lower or even negative over time. That would be exactly the setup crypto (especially alts) loves for big rallies.
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📬 In this issue:
The Latest Data and Why It’s More Encouraging for Rate Cuts (and Risk Assets)
Other Market Signals Showing Tight Conditions with Hints of Improvement
What This Means for Your Crypto Portfolio
As a fellow retail investor glued to these releases (and Denomos data), it’s still early, but this feels like a step in the right direction for risk assets. Let’s break it down.
The Latest Data and Why It’s More Encouraging for Rate Cuts (and Risk Assets)
The Fed’s benchmark holds at 3.5–3.75% (effective ~3.64% in early February 2026), unchanged since January. Unemployment improving to 4.3% (with job gains of 130k and a lower U-6 broader measure at 8%) shows a healthy, not overheating, labor market; not screaming for immediate cuts, but not a barrier either.
The real bright spot: January CPI cooled to 2.4% YoY (from 2.7%), beating forecasts of 2.5%. Core at 2.5% YoY reflects broad easing, driven by lower energy (-0.1% YoY), softer used cars, and moderating shelter/food. If this disinflation sustains (key word: sustainable), it boosts the odds of measured rate cuts resuming (perhaps sooner than markets priced in before).
Result? Real interest rates stay positive for now (~+0.8–1.0% headline), but the trajectory is improving. Positive real rates favor safety, but falling inflation narrows that gap, making risk assets more appealing as yields lose relative shine.
TIPS yields reinforce a cautious but stable picture: The 10-year TIPS yield remains firmly positive, sitting around 1.77–1.80%. There’s been only minor edging lower in recent sessions, but nothing dramatic or sustained enough to signal a big market shift toward expecting deeply negative real returns anytime soon.
This positive level continues to reflect investor comfort with real yields above inflation, which supports parking money in safer, inflation-protected assets rather than chasing high-risk plays. It keeps the bias tilted risk-off for now, even as cooler CPI prints open the door for potential future easing.
For crypto retail investors: This keeps real rates positive and supportive of defensive positioning (Bitcoin/tokenized gold) while we wait for stronger confirmation that the regime is truly shifting.
Beyond Unemployment and CPI: Other Market Signals Showing Tight Conditions with Hints of Improvement
While jobs and inflation grab headlines, other indicators reinforce a tightening-but-improving picture: mostly risk-off, yet building positives that could accelerate a regime shift.
Liquidity Growth: Denomos Global Liquidity Index (GLI) rose about $1.3T in January vs. December 2025. Decent inflow, but as I covered in my recent post, one surge isn’t enough. Altcoin seasons need consecutive big months to build real momentum.
ISM PMI Composite Index: Our Denomos custom composite (30% Manufacturing ISM + 70% Services ISM) reached 53.2% in January, up ~0.4% MoM. The four-month trend shows ~3.4% gains, meaning solid expansion territory (above 50), with more details coming in future posts. Encouraging, but not yet forceful enough to flip fully risk-on.
Dollar Weakening: DXY plunged to four-year lows near or below 95 in January/early February. Strong positive; a weaker dollar enhances global risk assets (crypto thrives here), supports emerging markets, and draws capital flows that often fuel crypto rallies.
Gold Price and Trend: Gold peaked at ATH ~$5,600/oz before a sharp ~20% drop in days, but holds a firm uptrend above $5,000/oz (recently ~$5,060–$5,100). Still leans risk-off, elevated levels signal safe-haven demand amid lingering uncertainty.
Russell 2000 vs. S&P 500: Since November 2025, small-caps (Russell 2000) have continued outperforming the S&P 500, with the performance gap widening. Bullish indicator, as broader market participation beyond big tech points to growing risk appetite, often a precursor for crypto strength.
Overall: Regime remains cautious (Fed hold + positive real rates and TIPS anchoring safety), but these consistent hints (liquidity up, dollar down, PMI climbing, small-caps leading) are stacking stronger than before. If inflation keeps cooling, this could snowball into clearer risk-on conditions.
What This Means for Your Portfolio: Risk-Off Easing, But Momentum Building
Putting it together: January’s drop in unemployment to 4.3% shows stability, while CPI cooling to 2.4% YoY is the real win. The progress toward 2% raises the odds of Fed cuts if sustained. Rates ~3.64% effective keep real rates positive and TIPS yields elevated for now, so high-risk alts face headwinds short-term.
But the tone has shifted: Cooler inflation narrows the real-rate drag, and those emerging signals (GLI surge, dollar weakness, Russell strength, PMI gains) are aligning more convincingly. Not regime-change yet, but the first meaningful steps toward risk-on in months.
For us retail investors: Stay measured and favor safer blockchain assets like Bitcoin or tokenized gold while watching closely for confirmation (sustained disinflation, actual cuts, bigger liquidity runs). No need to chase alts aggressively yet, but position for potential upside as data improves.
It’s encouraging: These prints suggest the tide could turn sooner. Crypto rewards patience during transitions, so keep tracking and stay flexible!
Closing Words
Hey, I’m just a retail investor like you, grinding through charts and data in this unpredictable space. I’m also co-founder of Denomos, the analytics platform made for retail crypto traders. All the metrics here (GLI jumps, custom PMI composite, etc.) are live on Denomos to help you read market regimes and catch opportunities early.
If these weekly breakdowns help you decide when to chase altcoins, rotate to safer blockchain assets, or just HODL—subscribe to my Substack. 👇 I offer no hype, only straightforward analysis to navigate this wild industry together.
Thanks for reading! Btw. I’m not a financial advisor. This is my view from the data only. Always DYOR and invest wisely.
Catch you in the next one. 🍻