The crypto market slid on Wednesday after US inflation data came in higher than expected, sparking investor concerns.
CPI Higher Than Expected
The Consumer Price Index (CPI), a key measure of inflation tracking the cost of goods and services across the U.S. economy, rose 0.5% in January, bringing annual inflation to 3%, the US Bureau of Labor Statistics reported today.
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This marks an acceleration from December’s 0.4% increase, pushing inflation 0.1% higher than the previous month. While 3% remains relatively moderate, it still exceeded market expectations.
While 3% inflation remains within a manageable range, the report comes after Fed Chair Jerome Powell suggested the central bank may keep interest rates steady for some time, fueling concerns that monetary policy could remain tighter for longer.
Market Reacted
The crypto market plunged immediately after the news, with the total market cap dropping 1.9% to $3.13 trillion.
All major cryptocurrencies, including Bitcoin and Ethereum, declined sharply following the CPI announcement at 8:30 a.m. (ET) on Wednesday.
Bitcoin fell from $96.4K to $94.2K within minutes, losing 2.3% of its value before rebounding to $95.3K.
Bitcoin dropped by 2.3% in minutes after the CPI data was announced. Source: CoinMarketCap Ethereum followed a similar pattern, dropping 3% from $2,656 to $2,572. The second-largest cryptocurrency rebounded to the $2,600 level but failed to hold the retest and is trading around $2,580 at the time of writing.
Why This Matters
Sticky inflation lowers the odds of imminent rate cuts, dampening risk appetite and pressuring crypto markets. With monetary policy likely to stay tighter for longer, volatility could persist as investors reassess Fed expectations.
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