Bitcoin, Ethereum Drop as U.S. Inflation Rises to 3%

 

The cryptocurrency market took a hit as inflation data for January came in hotter than expected, sparking concerns about the Federal Reserve’s policy stance. Bitcoin dropped to $94,250, while Ethereum and Solana also fell, reacting to a Consumer Price Index (CPI) increase of 3% year-over-year, surpassing the projected 2.9%.

 

Inflation, Interest Rates, and Market Impact

The latest CPI data dashed hopes for imminent Fed rate cuts, reinforcing a higher-for-longer interest rate environment. Core inflation, which excludes volatile food and energy prices, also ticked up to 3.3%, fueling speculation about potential rate hikes rather than cuts.

Grayscale’s Head of Research Zach Pandl warned that rate cuts are “off the table for now,” a sentiment echoed by the markets, which priced out aggressive monetary easing. Traders have now lowered expectations for any meaningful reduction in interest rates this year.

 

Crypto’s Reaction and Market Sentiment

• Bitcoin saw a sharp 2.3% drop in just 15 minutes, before stabilizing around $96,000.
• Ethereum slipped to $2,600, reflecting broader uncertainty across the digital asset space.
• Solana also declined, continuing its recent choppy trading pattern.

This reaction underscores how closely crypto markets are tied to macroeconomic trends, particularly inflation and monetary policy decisions.

 

Regulatory and Political Factors

Adding to the uncertainty is the ongoing impact of Trump’s trade policies and the evolving stance of the Federal Reserve. Powell has maintained that the Fed remains independent, but tensions between the White House and central bank are growing as Trump pushes for both tariffs and lower interest rates—a move that could introduce further volatility into markets.

 

What’s Next for Crypto?

With no clear relief from inflation and the Fed likely to maintain its cautious approach, crypto investors should brace for continued volatility. The market’s next major move will likely be shaped by the Fed’s March policy meeting, which could provide further clarity on rate expectations.

For now, Bitcoin and Ethereum are consolidating, with investors closely watching macroeconomic indicators for the next major signal.