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Bitcoin prices have been under pressure in 2022 after the collapse of algorithmic stablecoin terraUSD and subsequent bankruptcy filings from lender Celsius and hedge fund Three Arrows Capital.

Nicolas Economou | Nurphoto | Getty Images

Cryptocurrency prices got a slight but brief bump higher Wednesday following the April consumer price index report.

Bitcoin lost an earlier gain of more than 2% and was last hovering above the flatline at $27,748.24, according to Coin Metrics. At one point it rose above $28,000. Ether also pared gains and was last higher by less than 1% at $1,854.33.

Investors grew optimistic after the CPI report showed the inflation rate eased on an annual basis to 4.9% in April, which was slightly less than what economists polled by Dow Jones expected.

"When it comes to inflation data, bitcoin embraces its identity as a riskier asset," said Callie Cox, an analyst at investment company eToro. "Bitcoin has outperformed the S&P 500 on five out of the last six CPI days and it's on track to make it six out of seven with today's gains."

"Inflation is coming down, just as the Fed intended, and that's easing fears about the economy's future," she added. "Lower inflation also supports the case for the end of rate hikes, and higher rates are what started the crypto winter over a year ago."

CPI coming in below economists' forecast further cements the markets' expectation of rate hikes stopping, and rate cuts coming at some point during this year, said Steven Lubka, managing director at Swan Bitcoin.

"Ultimately, this represents an easing of tight liquidity conditions, an environment in which bitcoin has done extremely well historically," he said.

Bitcoin's correlation with the S&P 500 spiked to historic highs in 2022 as the Federal Reserve raised interest rates through the year. The flagship cryptocurrency's price tumbled 65% in 2022.

That link with stocks has fallen this year, however. At the same time, bitcoin's price and correlation with gold have increased. Crypto has also found other catalysts beyond inflation and the Fed namely, the regional banking crisis and the regulatory crackdown in the U.S. More recently, market participants have had their attention on Ordinals, a protocol that makes it possible to store and trade digital content on the Bitcoin blockchain, and memecoins.

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Bitcoin rises slightly after key inflation data comes in better than feared - CNBC