US Inflation Spike Shakes Bitcoin and Crypto Markets

The recent inflation data from the US has had a considerable effect on Bitcoin and the broader cryptocurrency market, though not every asset was affected in the same way. A Labor Department report indicated that inflation in January was higher than anticipated, primarily due to rising shelter costs.

Additionally, the Consumer Price Index (CPI) — a gauge of the prices for goods and services faced by consumers — increased by 0.3% for the month. Over the past 12 months, the CPI has risen by 3.1%, a slight drop from December’s 3.4%.

The unexpected jump in the CPI could present a challenge for the Federal Reserve (Fed), which has been hoping for inflation to decrease towards their 2% yearly goal. The central bank, which has maintained a stringent monetary policy for the past two decades, may find its plans to lower interest rates delayed by the January inflation spike. This delay is because the Fed needs more evidence before beginning to cut rates, a development that has let down those anticipating a reduction in inflation and led to a reevaluation of when rate changes might happen.

In light of these developments, the market intelligence platform Santiment has noted that the 3.1% CPI figure led to decreases in the market capitalization of both cryptocurrencies and stocks. Following this news, Bitcoin’s price, which had recently surpassed the $50,000 mark for the first time in more than two years, dropped below $49,000.

Santiment’s analysis suggests that this slight pullback could sharply divide market sentiment, possibly triggering widespread panic selling. In such a situation, the argument for purchasing during the dip becomes stronger, although overall sentiment might become negative.

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Disclaimer: 

This blog is for educational purposes only. The information we offer is not investment advice. Please always do your own research before investing. Any opinions expressed in this article are not a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), cryptocurrency portfolio, transaction, or investment strategy is appropriate for any particular individual.

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