Bitcoin (BTC) experienced a significant dip, falling below $49,000, as the latest U.S. inflation data, released on February 13, exerted downward pressure on risk assets.
The Consumer Price Index (CPI) for January indicated a higher-than-expected inflation rate, challenging the cryptocurrency’s recent gains and impacting broader market sentiment.
The CPI report revealed a month-on-month increase of 0.3% and a year-on-year inflation rate of 3.1%, both exceeding analysts’ predictions.
This led to immediate market reactions, with the Federal Reserve’s anticipated rate cut likely being postponed from March to later in the year. The CME Group’s FedWatch Tool showed a dramatic decrease in the probability of a March rate cut, dropping to just 8.5% from 17.5% the day before.
The news was not well received by Bitcoin, which saw a 3.8% price decline within a day, bottoming out at $48,435 on Bitstamp.
This setback comes after a period of positive momentum for Bitcoin, which had soared from $43,000 to over $48,000 in the previous week. The inflation data has also had a ripple effect on traditional markets, with the S&P 500 and Nasdaq Composite Index both experiencing declines.
Additionally, the latest inflation update overshadowed the positive inflows into Bitcoin ETFs, which had been contributing to a bullish outlook for the cryptocurrency.
Despite these challenges, some traders remain optimistic about ETF flows, which continue to absorb BTC supply at a rate significantly faster than new coins are minted.
This market turbulence has resulted in over $210 million in liquidations across the crypto market, highlighting the high stakes and volatility inherent in cryptocurrency trading. With the largest single liquidation on Binance involving an ETH/USDT pair worth $4.7 million, the event underscores the impact of macroeconomic indicators on digital assets.
