Bitcoin and the broader cryptocurrency market faced a sharp downturn on 12 February after the latest US inflation data came in higher than expected, raising concerns about macroeconomic pressures on digital assets.
Bitcoin Slips Below $95K
Bitcoin (BTC) briefly fell below $95,000 after the US Bureau of Labor Statistics released its Consumer Price Index (CPI) data, revealing an annual inflation rate of 3% for January 2025. The figure was 0.1% higher than analysts had anticipated.
Additionally, the CPI recorded a monthly increase of 0.5%, surpassing the Dow Jones forecast by 0.2%. This marked the most significant monthly inflation rise in a year.
Trump Pushes for Interest Rate Cuts
The inflation report coincided with renewed calls from US President Donald Trump to lower interest rates. In a post on his social media platform, Truth Social, Trump reiterated his stance, stating:
“Interest rates should be lowered, something which would go hand in hand with upcoming tariffs! Let’s Rock and Roll, America!”
Trump’s comments followed Federal Reserve Chairman Jerome Powell’s remarks that the central bank was in no rush to cut rates. Powell indicated that with the economy remaining strong and current policies being less restrictive than before, there was no urgent need for adjustments.
Monthly CPI adjustments from January 2024 to January 2025. Source: US Bureau of Labor Statistics
The president has repeatedly criticized Powell and the Federal Reserve, accusing them of failing to control inflation and mishandling bank regulations. In late January, he asserted that he would “demand that interest rates drop immediately.”
Inflation and the Impact of Trump’s Tariffs
January’s inflation increase was not unexpected, as the start of the year typically sees seasonal price rises, according to Nic Puckrin, founder of Coin Bureau.
“It would be an error to attribute this to President Trump’s tariffs,” Puckrin said, suggesting instead that the president’s policies could have an unexpected disinflationary effect.
Source: Donald Trump
He also noted that the latest CPI data is unlikely to impact the Federal Reserve’s interest rate decision in March. Instead, the Fed will be closely monitoring key economic indicators, including the unemployment figures on 7 March and the Personal Consumption Expenditures (PCE) index on 28 February.
“I wouldn’t be surprised if the PCE index comes in lower than expected, easing concerns over the impact of Trump’s tariffs,” Puckrin added.
Crypto Market Faces Uncertainty
Amid rising inflation, crypto analytics firm Steno Research warned that Bitcoin could face further selloffs due to the unfavorable macroeconomic environment for risk assets.
Historically, interest rate cuts have been linked to increased investment in cryptocurrencies, as lower rates tend to drive liquidity into high-risk assets. However, with no immediate rate cuts expected, Bitcoin and the broader crypto market may continue to face downward pressure in the short term.
