Key Points
- Bitcoin experienced a 2.3% drop following Wall Street's opening on March 12 due to high inflation in the US.
- Market participants are debating the possibility of Federal Reserve lowering interest rates in the coming months.
On March 12, Bitcoin (BTC) saw a 2.3% decrease as markets responded to persistent high inflation in the United States and its potential impact on interest rate cuts in 2024.
Bitcoin's Reaction to Inflation Data
Data reveals that BTC fell as much as 6% after reaching a higher all-time high of $73,054 on March 12, hitting a low of $68,636. This reaction was due to the February Consumer Price Index (CPI) data, which came in higher than anticipated at 0.4% in February. The year-on-year rate rose to 3.2%, compared to estimates of 3.1% and January’s 3.1%. Rising shelter and gasoline costs contributed to over 60% of the monthly increase in the all-items CPI index.
Following the release of the CPI data, discussions about the Federal Reserve potentially reducing interest rates in the near future began. According to the CME's FedWatch tool, traders are currently predicting a 1% chance of a March rate cut, compared to 15% on February 12. This suggests that market participants expect the U.S. central bank to maintain rates in March and May, with the first possible cut being made in June.
Views on Federal Rate Cuts
JPMorgan Chase CEO Jamie Dimon expressed his preference for the Fed to delay the decision to cut rates until later in the year. He cautioned that rates may remain high for some time and any decision by the Fed should be data-driven.
The fight against inflation is far from over according to a post by trading resource The Kobeissi Letter. The inflation of core services excluding shelter saw the largest jump since September 2022.
Inflows into the spot Bitcoin exchange-traded funds (ETFs) are helping to mitigate an inflation-driven sell-off. The price of Bitcoin had recovered back above $71,000 at the time of writing. Last week’s inflows into the spot Bitcoin ETFs totaled around “55.78K BTC ($3.68B) of inflows,” according to data from crypto intelligence firm Arkham.
Analysts have noted positive trends of increasing ETF flows, with “half a billion of net inflows” on March 11. BlackRock’s iShares Bitcoin Trust, IBIT, holds Bitcoin worth $14.76 billion, leading the pack. Fidelity’s Wise Origin Bitcoin Fund, FBTC, comes in second with over $9.26 billion in BTC under management.
On the other hand, outflows from Grayscale Bitcoin Trust, GBTC, totaled $11.04 billion over the past eight weeks. The fund recorded $494.1 million in outflows on March 11, its highest daily volume of capital withdrawals since January 23.
