Bitcoin and the wider cryptocurrency markets experienced a downturn on Wednesday after the U.S. reported higher-than-expected inflation rates, intensifying macroeconomic pressures on digital assets. Bitcoin’s value briefly dipped below $95,000 following the release of the Consumer Price Index data, which indicated an annual inflation rate of 3% for January 2025—exceeding expectations by 0.1%. The monthly CPI rose by 0.5%, overshooting the anticipated increase by 0.2%. This surge marked the largest monthly inflation increase in a year.
The inflation report coincided with U.S. President Donald Trump’s renewed calls to lower interest rates, which he reiterated on Truth Social, advocating for reduced rates alongside upcoming tariffs. Despite Trump’s insistence, Federal Reserve Chairman Jerome Powell had recently stated that the central bank is not in a hurry to change interest rates, citing the economy’s continued strength and the current policy stance being less restrictive.
Nic Puckrin, founder of Coin Bureau, attributed the unexpected inflation numbers to typical seasonal price hikes rather than Trump’s tariffs. He suggested that Trump’s policies might even result in an unanticipated disinflationary effect. Puckrin believes the latest CPI data is unlikely to influence the Federal Reserve’s March interest rate decision, as their focus might shift towards unemployment data and the Personal Consumption Expenditures (PCE) index.
Steno Research, a crypto analytics firm, had previously forecasted potential Bitcoin selloffs amid a rising inflationary environment, which tends to create an unfavorable milieu for risky assets. Historically, however, reductions in interest rates have been associated with increased investment in crypto products.
