The U.S. Consumer Price Index (CPI) for January came in hotter than expected, rattling both traditional and crypto markets. The headline inflation rate climbed 0.5% for the month, exceeding forecasts of 0.3%, while the year-over-year figure stood at 3.0% versus 2.9% expected. The core CPI, which strips out food and energy costs, also surged, rising 0.4% month-over-month compared to an expected 0.3%.
The data dashed hopes of early Federal Reserve rate cuts, sending asset prices tumbling across the board. Bitcoin (BTC), which had already been trending lower this week, plunged below $95,000 following the report.
Bitcoin’s Steady Range Faces Fresh Pressure
Since its post-election rally past $100,000 in November, Bitcoin has remained locked in a range between $90,000 and $109,000. However, persistent inflation concerns, AI-driven economic risks from China, and the looming threat of trade wars have weighed on market sentiment.
The latest inflation print raises the risk of prolonged high interest rates, which could put further pressure on risk assets, including Bitcoin. Federal Reserve Chair Jay Powell, in his testimony before Congress, signaled that rate cuts remain unlikely for now, barring significant economic deterioration.
Traditional Markets Feel the Heat
The inflation surprise triggered a broad market sell-off. U.S. stock index futures dropped 1%, while the 10-year Treasury yield surged 10 basis points to 4.63%, reflecting expectations of tighter monetary policy. Meanwhile, gold slipped more than 1%, and the U.S. dollar index rose 0.5%, indicating investor flight to safety.
Bitcoin, often seen as a hedge against inflation, failed to hold ground, suggesting its correlation with traditional markets remains strong.
Outlook: Is a Retest of $90K on the Cards?
With inflation proving sticky and the Fed maintaining a hawkish stance, traders may start pricing in the possibility of rate hikes in 2025 rather than cuts. If macroeconomic headwinds persist, Bitcoin could be at risk of retesting the $90,000 level in the near term.
For now, all eyes remain on upcoming economic data and central bank commentary, which could dictate Bitcoin’s next major move.
