Bitcoin falls after key inflation indicator rattles the market
Bitcoin fell sharply on Friday, dragging the rest of the digital asset market with it after key inflation data came in and seemingly upset investors.
The largest cryptocurrency is currently down 3% in 24 hours and is trading at $23,070, data from CoinGecko shows. Just last week, it broke above $25,000 per coin for the first time in eight months.
Most other cryptocurrencies have also taken a hit: Ethereum is down 3.1% over the past day, trading at $1,593; Dogecoin is now priced at $0.082, down 3.3% in 24 hours.
Cryptocurrency today follows the US stock market as usual. Investors shifted to risky assets like stocks and digital assets after key inflation data came in on Friday showing that more rate hikes could be coming from the US Federal Reserve.
CoinShares Head of Research James Butterfill told Decrypt that the sudden drop in crypto prices was the “direct result of US macro data,” adding that “investors expect a more aggressive Fed.”
Friday’s report found that inflation in the world’s largest economy was on the rise, with the personal consumer spending index rising 5.4% year-on-year and the core measure rising 4.7%.
Equity investors reacted by selling: the Dow Jones Industrial Average was down 390 points, or 1.2%, while the S&P 500 was down 1.6% and the Nasdaq Composite was down 2%.
Bitcoin is doing nothing new: the volatile assets followed other volatile assets such as technology stocks when there were signs that the Fed could continue to be aggressive with its aggressive monetary policy.
The Fed began raising interest rates last year in an urgent effort to tame the US’s 40-year high inflation. She raised rates four times by 75 basis points and then slowed down by raising them by 50 basis points.
Recently, the central bank slowed to 25 basis points, but Fed Chairman Jerome Powell has repeatedly said the road to curbing inflation will be bumpy.
Investors tend to avoid “risks” like Bitcoin and instead put money in “safe haven” assets like the US dollar – which is rising today: The dollar index rose 0.5% on Friday, its highest in nearly two months .
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