A hotter-than-expected U.S. inflation report shocked the
financial markets today (Wednesday), triggering sharp declines across
cryptocurrencies and equities. Bitcoin tumbled below $95,000 following the release of
January’s Consumer Price Index (CPI) data, which showed inflation climbing
faster than anticipated.
The report dampened hopes for Federal Reserve rate
cuts in 2025, affecting Bitcoin and most altcoin prices. Bitcoin dropped 2% today (Wednesday), trading as low as $94K. Prices have also declined in the altcoin space, with Ethereum and XRP down 6% and 4%, respectively, in the past week.
According to Bloomberg data, the CPI rose 0.5% in
January, surpassing expectations of a 0.3% increase and accelerating from
December’s 0.4% rise. On an annual basis, inflation climbed to 3.0%, above the
forecasted 2.9%.
Bitcoin Price Plunges, Source: CoinMarketCap
The core CPI, which excludes food and energy prices,
also came in higher than anticipated at 0.4% month-over-month and 3.3%
year-over-year. The data signaled that inflationary pressures remain stubborn,
challenging market hopes for monetary easing in the near term.
The latest CPI reading reinforced concerns that the
Federal Reserve may hold interest rates higher for longer. Just a day before
the report, Fed Chairman Jerome Powell reportedly reiterated that the central
bank remains cautious about premature rate cuts.
January’s data has further bolstered the case for the
Fed to maintain its restrictive stance. Market expectations for rate cuts in
2025 have shifted significantly.
Bitcoin’s decline below $95,000 extends a period of
price consolidation that began after it briefly surpassed $100,000 in November.
Since then, the cryptocurrency has been stuck in a range between $91,000 and
$105,000, weighed down by macroeconomic uncertainty.
Bitcoin Faces Price Consolidation, Source: TradingView
Several factors have contributed to Bitcoin’s struggle
to sustain momentum. Concerns over artificial intelligence-driven economic
shifts in China, the potential for trade wars, and the Fed’s cautious stance on
rate cuts have all played a role, Coindesk reported.
A Shift Away from Speculative Assets
Higher-for-longer interest rates typically reduce the
appeal of speculative assets like Bitcoin, as investors seek safer returns in
bonds and other fixed-income instruments. Adding to market concerns, analysts warn that the
latest inflation figures do not yet reflect the potential impact of newly
announced U.S. tariffs on Chinese imports.
With inflation remaining stubbornly above the Fed’s 2%
target, markets may need to adjust to a prolonged period of restrictive
monetary policy. This could pressure risk assets, including Bitcoin, in the
near term.
A hotter-than-expected U.S. inflation report shocked the
financial markets today (Wednesday), triggering sharp declines across
cryptocurrencies and equities. Bitcoin tumbled below $95,000 following the release of
January’s Consumer Price Index (CPI) data, which showed inflation climbing
faster than anticipated.
The report dampened hopes for Federal Reserve rate
cuts in 2025, affecting Bitcoin and most altcoin prices. Bitcoin dropped 2% today (Wednesday), trading as low as $94K. Prices have also declined in the altcoin space, with Ethereum and XRP down 6% and 4%, respectively, in the past week.
According to Bloomberg data, the CPI rose 0.5% in
January, surpassing expectations of a 0.3% increase and accelerating from
December’s 0.4% rise. On an annual basis, inflation climbed to 3.0%, above the
forecasted 2.9%.
Bitcoin Price Plunges, Source: CoinMarketCap
The core CPI, which excludes food and energy prices,
also came in higher than anticipated at 0.4% month-over-month and 3.3%
year-over-year. The data signaled that inflationary pressures remain stubborn,
challenging market hopes for monetary easing in the near term.
The latest CPI reading reinforced concerns that the
Federal Reserve may hold interest rates higher for longer. Just a day before
the report, Fed Chairman Jerome Powell reportedly reiterated that the central
bank remains cautious about premature rate cuts.
January’s data has further bolstered the case for the
Fed to maintain its restrictive stance. Market expectations for rate cuts in
2025 have shifted significantly.
Bitcoin’s decline below $95,000 extends a period of
price consolidation that began after it briefly surpassed $100,000 in November.
Since then, the cryptocurrency has been stuck in a range between $91,000 and
$105,000, weighed down by macroeconomic uncertainty.
Bitcoin Faces Price Consolidation, Source: TradingView
Several factors have contributed to Bitcoin’s struggle
to sustain momentum. Concerns over artificial intelligence-driven economic
shifts in China, the potential for trade wars, and the Fed’s cautious stance on
rate cuts have all played a role, Coindesk reported.
A Shift Away from Speculative Assets
Higher-for-longer interest rates typically reduce the
appeal of speculative assets like Bitcoin, as investors seek safer returns in
bonds and other fixed-income instruments. Adding to market concerns, analysts warn that the
latest inflation figures do not yet reflect the potential impact of newly
announced U.S. tariffs on Chinese imports.
With inflation remaining stubbornly above the Fed’s 2%
target, markets may need to adjust to a prolonged period of restrictive
monetary policy. This could pressure risk assets, including Bitcoin, in the
near term.
