U.S. Inflation Exceeds Expectations in January, Causing Market Decline and Pushing Bitcoin Below $95K
U.S. inflation unexpectedly accelerated in January, driving a broad sell-off across both crypto and traditional financial markets.
The Consumer Price Index (CPI) rose 0.5% in January, significantly above the 0.3% increase anticipated and the 0.4% rise in December. On a year-over-year basis, CPI jumped 3.0%, slightly exceeding the 2.9% forecast and matching the December figure.
The core CPI, which excludes food and energy, climbed 0.4% in January, also higher than the expected 0.3% increase and the 0.2% rise seen in December. On an annual basis, core CPI came in at 3.3%, outpacing the anticipated 3.1% and December’s 3.2% increase.
Bitcoin (BTC), already on a downward trajectory this week, plunged below $95,000 following the release of the inflation data. The CoinDesk 20 Index, which tracks the top cryptocurrencies by market capitalization, dropped 2.9% in the last 24 hours.
In response to the data, U.S. stock futures fell about 1%, the 10-year Treasury yield rose 10 basis points to 4.63%, and gold saw a decline of more than 1%. Meanwhile, the dollar index rose by 0.5%.
Bitcoin, which briefly surpassed $100,000 after Donald Trump’s November election victory, has remained stuck in a range between $90,000 and $109,000 for over two months. Concerns about China’s AI policies, trade war threats, and the outlook for sustained high interest rates amid inflation have kept Bitcoin’s price action in check.
Federal Reserve Chairman Jay Powell, in testimony before Congress yesterday, reiterated that the Fed is unlikely to cut rates further unless there’s a significant downturn in the economy or inflation.
With today’s inflation data signaling continued inflationary pressures, markets may now price in potential interest rate hikes for 2025, which could push Bitcoin to retest the $90,000 level.
