US inflation unexpectedly accelerated in January, driving both cryptocurrency and traditional markets sharply lower.
The Consumer Price Index (CPI) rose by 0.5% month-over-month, surpassing forecasts of 0.3% and December’s 0.4% increase.
On an annual basis, CPI climbed 3.0%, compared to expectations of 2.9% and December’s reading of 2.9%
Core CPI, which excludes volatile food and energy prices, also rose sharply, up 0.4% month-over-month, exceeding the 0.3% forecast and December’s 0.2%. Annually, core CPI hit 3.3%, higher than the anticipated 3.1% and December’s 3.2%.
Bitcoin (BTC) dropped sharply, falling below $95,000 immediately after the inflation report.
Bitcoin has traded in a range of $90,000–$109,000 since November, with today’s inflation figures increasing the likelihood of a retest of the lower end of this range.
Apart from Bitcoin, US stock futures also fell approximately 1%, while the 10-year Treasury yield surged 10 basis points to 4.63%.
Crypto market in the red
The global crypto market cap stands at $3.12 trillion, reflecting a 1.85% decrease over the past 24 hours.
The total cryptocurrency market volume over the same period rose by 13.82% to $109.54 billion.
Bitcoin currently trades 1.95% lower at $94,986.
Bitcoin’s market dominance has slightly increased by 0.07% to reach 60.37%.
Major altcoins like XRP, Solana (SOL), and Ethereum are also feeling the heat.
XRP and Solana are down over 3%, while Ethereum is down around 2%.
Crypto prices outlook
The crypto market has remained volatile, largely due to a lack of positive catalysts. The CPI data has further dampened trader sentiment, signaling potential declines ahead.
The stronger-than-expected inflation print comes amid Fed Chairman Jay Powell’s recent comments, where he signaled that further interest rate cuts are unlikely unless economic conditions worsen significantly.
The restrictive monetary policy has continued to cap Bitcoin’s upside potential, as higher interest rates increase the appeal of traditional financial assets such as bonds and savings accounts, making them more attractive than riskier assets like cryptocurrencies.
According to the CME FedWatch Tool, the probability of the Federal Reserve maintaining its current target rate of 4.25%-4.50% at the March 18-19 FOMC meeting has increased to approximately 98%, up from 95% prior to the data release.
Conversely, the likelihood of a 25-basis-point rate cut has dropped to about 2%, down from 5%.
Today’s data could push markets to even price in potential rate hikes for 2025.
The threat of sustained inflation, coupled with geopolitical and AI-driven concerns around China, continues to cast uncertainty on market performance.
The selling pressure appears likely to persist in the near term. Traders are now turning their focus to the upcoming US Producer Price Index (PPI) inflation data, which is scheduled for release tomorrow.
Should the PPI align with the CPI data, it could exacerbate bearish sentiment and potentially trigger a further downturn in the crypto market.
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