Bitcoin, the most famous crypto currency, posted a drop of 2%, after reaching a new all-time high above $50,000 the day before. The reason for this decline? US inflation report higher than expected. The latter weighed on expectations of interest rate cuts from the FED. How does Bitcoin (BTC) react to inflation? What is the outlook for crypto as well as traditional markets? Decryption.
The report on American inflation, a hard blow for Bitcoin
The Bureau of Labor Statistics has just released the US inflation report for the month of January. According to this report, the CPI increased by 0.3% month-on-month and 3.1% year-on-year. This is well above the expectations of analysts, who expected 0.2% and 2.9% respectively. It’s about 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 nevertheless crossed the $50,000 mark the day before. Indeed, this inflation reduces the chances that the FED will lower its interest rates in the coming months. Which would have been favorable to Bitcoin. According to the CME FedWatch tool, the likelihood of a rate cut in May went from 52% to 34%.
What prospects for Bitcoin?
Despite this declineBitcoin remains on a long-term upward trend. This is driven by growing demand from institutional and retail investors.
Bitcoin also enjoys the support of influential figures, such as Elon Musk. The Tesla boss reportedly invested $1.5 billion in crypto. Bitcoin could therefore rebound quickly and aim for new heights.
In short, Bitcoin experienced a 2% decline after the publication of a higher than expected inflation figure in the United States. However, the crypto remains on a long-term uptrend thanks to its scarcity and popularity. To be continued…
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