Bitcoin and other Altcoin prices fell on Wednesday after the United States has published warmer than expected consumer inflation data.
Bitcoin (BTC) dropped by 3%, while other popular altcoins have experienced higher decreases. Litecoin (Thal) was one of the least efficient parts, lowering more than 11% in the last 24 hours.
Shiba Inu (Salogner) and Solana (GROUND) fell by more than 5%, while the total market capitalization of all cryptocurrencies decreased by 3% to 3.11 billions of dollars.
American inflation climbed in January
The main catalyst for the sale was a report showing that American inflation had jumped in January, a trend that could continue this month. The head consumer price index went from 0.4% in December to 0.5% in January, exceeding the median estimate of 0.5%. This increase resulted in an annual increase of 3.0%, the highest level in several months.
Basic consumers’ inflation increased from 0.2% to 0.4% on a monthly basis and from 3.2% to 3.3% per year.
These figures have pushed the term contracts on American actions below, the Dow Jones and Nasdaq 100 indices lowering more than 400 points. US bond yields increased, yields to 10 years and 30 years of age, from 4.63% and 4.82% respectively.
The market reaction was mainly motivated by higher interest rate expectations longer. In a statement on Tuesday, the president of the federal reserve Jerome Powell reiterated that the Fed was not in a hurry to reduce rates, invoking persistent inflation. The Fed official, Beth Hammack, has echoed a similar position, declaring that future rate decisions should depend on lower inflation. She said::
“As long as the labor market remains healthy, I am looking for wide evidence that inflation returns in a sustainable way to 2% before adjusting politics more.”
Impact of inflation on Bitcoin, Shiba Inu, Solana and other Altcoins
Higher inflation affects Bitcoin and other altcoins such as Solana and Shiba Inu because of its impact on interest rates and bond markets.
The Fed has a double mandate to maintain low inflation and a stable labor market. It generally reduces rates when inflation falls to stimulate consumption. However, with the IPC going further from the target of 2%, the probability of additional rate drops has decreased. During its last meeting, the central bank has planned two rate drops this year.
CPI printing heated to red means that the Fed may not reduce rates this year. Mohammed El-Erian has suggested that the Fed can increase rates since Trump prices Will aggravates the situation.
Bitcoin and altcoins tend to decrease when the Fed increases rates, as evidenced in 2022. Conversely, they often bounce back when the Fed signals a transition to rate drops, as happened at the beginning of 2024.