Key Points
- Bitcoin value dropped as US wholesale inflation in April exceeded predictions.
- Higher-than-anticipated inflation might influence the Federal Reserve’s future monetary policy decisions.
Bitcoin’s value experienced a decline on Tuesday, coinciding with the US wholesale inflation rate for April surpassing economists’ predictions.
The leading digital asset by market capitalization has tumbled below the $62,000 mark, marking a 1.6% decrease in the past day to trade at $61,731 by 10:10 a.m. ET.
US Inflation Data
The US Bureau of Labor Statistics reported on Tuesday that the Producer Price Index (PPI) increased by 0.5% in April, exceeding the anticipated 0.3% rise.
Market players are keeping a close eye on Tuesday’s PPI and Wednesday’s Consumer Price Index (CPI) for potential implications on interest rates.
Analysts from Wintermute have stated that the US Federal Reserve has established a criterion for initiating monetary easing – three consecutive softer inflation readings.
Impact on Federal Reserve’s Monetary Policy
The unexpectedly high wholesale inflation data might provide valuable insight into how the Federal Reserve could shape its monetary policy decisions in future Federal Open Market Committee (FOMC) meetings.
The increased wholesale inflation could pressure the US central bank to sustain higher interest rates for an extended period, a scenario that could deter investment in risk assets like Bitcoin.
Following Tuesday’s PPI report, the CME’s FedWatch tool now predicts a 29.2% possibility of a rate cut at the FOMC meeting in July and a 48.9% chance at the September meeting.
Interest traders anticipate a 91.3% likelihood that rates will remain unchanged at the June meeting.
Analysts from Wintermute’s OTC Trading Desk said in an email, “The FOMC has defined the bar to begin loosening monetary conditions as three consecutive softer inflation prints, we would expect a market response to any surprise beat or miss this week.”
In the same period, the GM 30 Index, which represents a selection of the top 30 cryptocurrencies, fell 2.18% to 126.96.
