Bitcoin falls 2% due to higher-than-expected US inflation | CoinDesk JAPAN

• Bitcoin fell to $48,800 in January as the consumer price index rose 3.1% year-on-year, higher than analysts expected.
• The probability of a rate cut in May fell from 52% to 34%, according to the CME FedWatch tool.
• Oanda’s Craig Erlam said that while “terrible” inflation had a short-term negative impact, it did not “dampen the mood” in the crypto market.

Crypto asset market and related stocks fall

The higher-than-expected US inflation rate on the 13th weighed on expectations for interest rate cuts, and Bitcoin (BTC) fell below $49,000 (approximately 7.35 million yen, equivalent to 150 yen to the dollar).

Bitcoin fell about 2% to $48,700 from the level of just over $50,000 at the beginning of the 13th, and the CoinDesk 20, which measures the performance of the entire crypto asset (virtual currency) market, fell 2.4%.

Cryptocurrencies recovered some of their losses later in the day, with Bitcoin recovering to $49,100, but most CoinDesk 20 stocks were still down 2% to 3% over the past 24 hours. Solana (SOL) has held up, rising more than 1% over the same period, while Bitcoin is down 1.5%.

Cryptocurrency-related stocks listed in the United States fell sharply at the market open, but recovered some of their losses in the afternoon. The stock prices of major U.S. crypto asset trading companies Coinbase and MicroStrategy have fallen about 3% from their closing prices on the 12th. Major Bitcoin mining companies Marathon and Riot Platforms fell 5% and 2%, respectively.

January CPI higher than expected, lowering probability of interest rate cut

The decline comes after the consumer price index (CPI) rose 3.1% year-on-year in January, beating analysts' expectations of 2.9%. Market participants now believe there is only a 34% chance that the U.S. Federal Reserve will cut interest rates in May, down from 52% a day earlier, according to the CME FedWatch tool.

The reduced likelihood of an imminent rate cut also weighed on traditional markets. The yield on the 10-year U.S. Treasury rose 12 basis points, while the S&P 500 and the tech-heavy Nasdaq Composite Index fell as much as 2%.

“This is not the inflation report the Federal Reserve was hoping for, and the market is reacting accordingly,” Oanda senior analyst Craig Erlam said in a note Tuesday. ” he commented.

Ahlam said traders are currently pricing in just three rate cuts (75 basis points) in 2024, well down from the 175 basis points recorded last month, but this is due to concerns about inflation. He pointed out that this suggests that they may be overly pessimistic.

“While markets looked too optimistic last month, I think the pendulum may now have swung too far in the other direction,” said Ahlam. “We still see no significant progress on inflation. “I expect we will see further progress in the coming months.”

Ahlam said the “terrible” inflation numbers come at an unlucky time for Bitcoin, and he said the “terrible” inflation numbers come at an unlucky time for Bitcoin, and that it was the very moment it breached the $50,000 level for the first time since December 2021 on the 12th. I did a lug pull (remove the ladder).'' “While it will be damaging in the short term, I don't think it will dampen the mood in the crypto industry too much,” he said.

｜Translation and editing: Rinan Hayashi
｜Image: CoinDesk
｜Original text: Bitcoin Drops 2% on Hotter-Than-Expected US Inflation