The rise in inflation rates is shaking up Bitcoin!

Investors are surprised by the March Consumer Price Index (CPI) report. This report shows a higher-than-expected increase. This news has called into question hopes of a series of interest rate cuts by the FED this year. Consequently, the bitcoin market has experienced turbulence. Let’s explore the impact of this situation on the crypto market.

Persistent Inflation

While a slowdown in inflation is eagerly awaited, March figures are out. Contrary to expectations, these figures showed an increase of 0.4%, exceeding the forecasts of 0.3%. Over a year, the CPI climbed 3.5%, above the 3.4% expected. It is considered a key indicator for Bitcoin enthusiasts.

This higher-than-expected inflation had a direct impact on the price of bitcoin. It dropped by more than 1% to reach $68,200 in the minutes following the report’s release. Traditional markets also did not react well. They saw declines of around 1.5% for the futures contracts on the S&P 500 and Nasdaq 100 indexes. In addition, the yield on the 10-year US Treasury bonds jumped 13 basis points reaching 4.50%. While the dollar index climbed 0.5%.

Uncertain Prospects for Bitcoin

Prior to this announcement, investors were expecting more accommodative monetary policies from the FED to be a bullish catalyst for bitcoin in 2024.

Investors were expecting something entirely different. They anticipated that more accommodative monetary policies from the FED would be a bullish catalyst for bitcoin in 2024. However, the persistence of high inflation calls these expectations into question. Market participants have had to revise their forecasts, switching from around 5 or 6 rate cuts expected this year to only 2 or 3. The first could possibly be in June or July.

The persistence of inflation in the United States has created an unfavorable context for bitcoin. It has shaken the hopes of a monetary easing that could have benefited crypto. Investors will now have to reassess their strategies in the face of these new market conditions. They will thus be waiting for clearer signs of the FED’s sustainable control over inflation.