Bitcoin And Altcoin Plunge After US Inflation Data

The cryptocurrency market has undergone significant volatility following the release of the latest US inflation data, with Bitcoin and altcoins witnessing a sharp decline. The sudden increase in inflation figures has caused a shift in market expectations regarding the Federal Reserve's interest rate actions, leading to waves of instability across financial markets. Inflation data exceeds expectations The U.S. inflation report for January shows that annual inflation has risen to 3.0%, exceeding the expected level of 2.9%. Meanwhile, the annual core inflation, excluding volatile food and energy prices, reached 3.3%, higher than the expected 3.1%. Core monthly inflation also exceeded expectations, rising by 0.4% instead of the expected 0.3%. These numbers indicate that inflation remains stable and above the Federal Reserve's 2% target, raising concerns that interest rates may stay high for longer than previously expected. Bitcoin and Altcoin react strongly After the announcement, Bitcoin, which was trading around $96,600, quickly dropped to $94,088. Ethereum also witnessed a significant decline, dropping from $2,665 to $2,558. The impact is even more severe on altcoins, many of which recorded double-digit percentage losses. The cryptocurrency market's reaction reflects investors' concerns that higher-than-expected inflation could lead to a delay in the long-awaited interest rate cuts by the Federal Reserve. Lower interest rates are typically beneficial for risk assets such as cryptocurrencies, as they reduce the opportunity cost of holding non-yielding investments. The market adjusts expectations for interest rate cuts Before announcing the inflation data, the market largely priced in the possibility of the Federal Reserve cutting interest rates in September 2025. However, with inflation proving more persistent, expectations are now shifting as investors see the possibility of interest rate cuts being less continuous rather than a decisive move. The uncertainty surrounding monetary policy has also affected traditional financial markets. US stock futures fell, with S&P 500 futures down about 1% following the inflation report. This reaction underscores the market's sensitivity to inflation trends and Federal Reserve policy adjustments. Political pressure on the Federal Reserve When the Federal Reserve grapples with inflation, the political pressure on the organization also increases. Former U.S. President Donald Trump reiterated his call to lower interest rates just minutes before the inflation report was released. Trump suggested that cutting interest rates could be done alongside new tariffs, reflecting his view on using monetary policy as an economic tool. While the Federal Reserve continues to maintain its independence, such statements from prominent political figures can further complicate monetary policy decisions, especially as the 2024 US presidential election approaches. Looking forward Investors and traders will now closely monitor additional economic data and communication from the Federal Reserve to glean any hints regarding future interest rate decisions. If inflation continues to exceed expectations, the market may have to brace for an extended period of high interest rates, which could put pressure on risk assets, including cryptocurrencies. In the short term, Bitcoin and the cryptocurrency market in general may still be very volatile as traders digest the impact of the latest inflation data. The focus will also be on the upcoming meetings of the Federal Reserve and whether policymakers will adjust their outlook to deal with persistent inflation pressures. Conclusion The latest inflation data from the United States has shocked the cryptocurrency and financial markets, highlighting the ongoing instability surrounding economic policies. With inflation stubbornly exceeding expectations, the anticipated interest rate cut may be delayed, impacting investor sentiment across all asset classes. As the Federal Reserve navigates this challenging environment, cryptocurrency traders should prepare for ongoing volatility in the months ahead.