U.S. Inflation Surpasses Expectations in January, Weighing on Markets and Pushing Bitcoin Below $95K
U.S. inflation unexpectedly accelerated in January, leading to a sharp decline in both traditional and crypto markets.
The Consumer Price Index (CPI) increased by 0.5% in January, well above the anticipated 0.3% rise and December’s 0.4% pace. On a year-over-year basis, CPI rose by 3.0%, slightly higher than the forecasted 2.9% and matching the December figure.
Excluding food and energy, the core CPI rose 0.4% in January, surpassing the expected 0.3% increase and December’s 0.2% rise. The annual core CPI also outpaced expectations, coming in at 3.3%, compared to the forecasted 3.1% and 3.2% in December.
Bitcoin (BTC), which had already been trending downward this week, took a significant hit after the inflation data was released, falling below the $95,000 mark. The CoinDesk 20 Index, which tracks the top cryptocurrencies, dropped 2.9% in the past 24 hours.
U.S. stock index futures fell around 1% in response to the inflation report, while the 10-year Treasury yield surged 10 basis points to 4.63%. Gold lost over 1% in value, and the dollar index gained 0.5%.
After briefly breaking the $100,000 barrier following Donald Trump’s election win in November, Bitcoin has been trading within the $90,000 to $109,000 range for more than two months. Factors such as AI-related concerns in China, potential trade wars, and expectations of prolonged high interest rates due to continued economic strength and inflation have all contributed to the market’s stagnation.
Federal Reserve Chairman Jay Powell, speaking before Congress yesterday, confirmed that further rate cuts are unlikely unless there is an unexpected downturn in the economy or inflation.
With today’s inflation data signaling a continued inflationary environment, markets may begin to price in potential interest rate hikes for 2025, which could push Bitcoin back toward testing the $90,000 threshold.
Share this content:
