Bitcoin: -2% after the US inflation report

Bitcoin, the most famous cryptocurrency, has seen a 2% decline after reaching a new all-time high above $50,000 the day before. The reason for this downturn? A report on U.S. inflation that was higher than expected. This has impacted expectations for interest rate cuts by the Fed. How does Bitcoin (BTC) react to inflation? What are the prospects for crypto and traditional markets? An analysis.

Bitcoin dropped 2% from $50,000 after a hotter-than-expected U.S. CPI reading. @sndr_krisztian reportshttps://t.co/89BRCb5lmr

— CoinDesk (@CoinDesk) February 13, 2024

The U.S. inflation report, a heavy blow for Bitcoin

The Bureau of Labor Statistics just released the U.S. inflation report for January. According to the report, the CPI increased by 0.3% over a month and by 3.1% over a year. This is much more than analysts’ expectations, who were predicting 0.2% and 2.9% respectively. It is the highest annual inflation rate since 2022.

This higher-than-expected inflation had a negative effect on Bitcoin, which fell below $49,000. The flagship crypto had nevertheless breached the $50,000 mark the day before. Indeed, this inflation reduces the chances of the Fed lowering its interest rates in the coming months, which would have been favorable to Bitcoin. According to the CME FedWatch tool, the probability of a rate cut in May went from 52% to 34%.

What are the prospects for Bitcoin?

Despite this decline, Bitcoin remains on a long-term upward trend. This is driven by growing demand from institutional investors and individuals.

Bitcoin also benefits from the support of influential figures, such as Elon Musk. The Tesla boss reportedly invested $1.5 billion in crypto. Therefore, Bitcoin could quickly rebound and aim for new heights.

In short, Bitcoin experienced a 2% decline after the release of a higher-than-expected U.S. inflation figure. However, the crypto remains on a long-term upward trend thanks to its scarcity and popularity. To be continued…