Bitcoin (BTC) sank below $30,000 on Wednesday, minutes after data showed U.S. inflation was higher than expected in April.
BTC dropped over 6% from intraday highs, and fell as low as $29,100. Other major cryptocurrencies also turned negative for the day after the reading. Ethereum is now down nearly 7%, while Binance Coin and Ripple are trading down 16% and 20%, respectively.
BTC’s sharp fall mirrors that seen in U.S. stock futures, which all turned negative after data showed the U.S. consumer price index (CPI) rose 8.3% in April, higher than expectations of 8.1%.
U.S. CPI data shows inflation nowhere near cooling
While the CPI data was lower than March’s reading of 8.5%, indicating that inflation is nearing its peak, it shows that prices are going to take much longer than initially thought to cool down.
The high inflation reading also means that the U.S. Federal Reserve and other central banks will consistently hike interest rates this year- a scenario that is decidedly negative for crypto markets.
The U.S. CPI data has brought enormous amount of anxiety among traders as the number shows that inflation is no way close enough to cool off. Looking at the numbers, it seems that it is not only the Fed who will need to do a lot to control inflation but the Biden Administration also needs to do a lot more.
-Naeem Aslam, Chief Market Analyst at AvaTrade
BTC was already under pressure after the Fed raised interest rates last week. With this new development, the token is likely to sink to $28,000- a move that could trigger even more selling pressure.
Inflation has spiked this year following a prolonged period of loose monetary policy. Economic shocks from the Russia-Ukraine war have also exacerbated this issue.
BTC, crypto markets set for more losses
Fears of Fed tightening have dominated much of crypto trading this year, causing BTC’s over 50% drop from near record highs. Total crypto market capitalization has also slumped by over $800 billion this year, and is currently sitting around $1.4 trillion.
BTC had largely stuck to a holding pattern for most of Wednesday, in anticipation of the CPI data.
The crypto market is now likely headed for more pressure, as traders readjust for higher interest rates this year.
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