Bitcoin Slumps as March US CPI Data Surpasses Expectations

Bitcoin Slumps as March US CPI Data Surpasses Expectations

Bitcoin prices tumbled following the release of the U.S. Consumer Price Index (CPI) data for March, which revealed a hotter-than-expected inflation rate of 3.5%. This figure exceeded the forecasts of 3.4% and outpaced the previous month’s rate of 3.2%, signaling persistent inflationary pressures in the economy. The data, issued by the U.S. Bureau of Labor Statistics, has injected fresh uncertainty into financial markets, particularly affecting the cryptocurrency sector.

The March CPI report, crucial for gauging the future direction of the Federal Reserve’s monetary policy, suggests that the Fed’s anticipated 2% inflation target remains elusive. With inflation running hotter than expected, it implies that interest rates may stay elevated longer than previously anticipated, delaying the onset of rate cuts.

The CPI for All Urban Consumers (CPI-U) rose by 0.4 percent in March on a seasonally adjusted basis, mirroring the increase seen in February. Over the last 12 months, the all-items index has risen by 3.5 percent before seasonal adjustment. Despite hopes for a cooling inflation, the core CPI, excluding volatile items like food and energy, remained steady at 3.8% year over year, underscoring the ongoing challenge of achieving a slow deflationary process in the U.S.

Market expectations have been upended by these inflation figures, with early bets on Fed rate cuts being pushed back from June to potentially September, as indicated by the CME FedWatch Tool’s projection of over a 45% chance for a cut in the latter month.

Bitcoin’s price reacted negatively to the inflation news, dropping by approximately 4.3% to $67,721.59. This movement underscores the cryptocurrency’s sensitivity to macroeconomic indicators and its potential role as an inflation hedge amidst ongoing market volatility. Traders and investors are now closely monitoring key support levels for Bitcoin, as well as Ethereum, given the speculative forecast of further price adjustments in response to halving-related volatility and market dynamics.

    Newsletter | Every weekday

    Smart Central News Weekly Briefing

    Only top industry news of the week in your inbox