Bitcoin Slumps Below $50,000 as Inflation Data Surprises Analysts
A higher-than-expected inflation report has led to a correction in the cryptocurrency market, with Bitcoin (BTC) dropping below the $50,000 price level. The US consumer price index (CPI) rose by 0.3% in January, surpassing the 0.2% that analysts had predicted. This increase represents a year-on-year rise of 3.1% and a decline from the previous month’s 3.4%. The unexpected inflation data has challenged expectations of a rate cut by the Federal Reserve in the coming months, putting pressure on risk assets such as BTC and equities.
Rate Cut Expectations Pushed Further into the Future
According to Peter Cardillo, chief market economist at Spartan Capital Securities, if high inflation continues for another month or two, the possibility of a rate cut in June will diminish. He believes that September is now a more likely timeframe for a rate cut, as it is too early to say that inflation has been controlled.
Dollar Strengthens as Fed Cut Expectations are Delayed
The sell-off in Bitcoin has triggered a surge in the value of the US dollar. The dollar index (DXY) has reached new highs for the year due to expectations of a delayed rate cut by the Federal Reserve. Glassnode analysts suggest that signs of cooling inflation will likely bring strength back into Bitcoin.
Uncertain Outlook for Bitcoin and USD
The trajectory of both Bitcoin and the US dollar remains uncertain as investors await CPI data and updates from the Federal Reserve. Any signs of inflation nearing 2% could impact rate cut expectations and potentially lead to a Bitcoin rally.
Bitcoin Price Decreases by 2.7%
At the time of writing, Bitcoin is trading at $48,735, representing a 2.7% decrease in price for the day.
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