Bitcoin, Ethereum Dip as U.S. Inflation Hits 40-Year High

The market has responded negatively to reports on the consumer price index on inflation in the United States.

Bitcoin, Inflation Update Ethereum Dip

Inflation in the United States has reached its highest level in 40 years year-on-year, and crypto assets have declined accordingly.

Both Bitcoin and Ethereum fell on Thursday shortly after the Ministry of Labor reported that the consumer price index had risen 7.5% from last year. The January price increase contributed to the annual rise as the cost of all items increased by 0.6%.

The 7.5% figure is the highest inflation rate in the United States recorded by the CPI since 1982. Dow Jones estimated this number to be 7.2%. The market reacted quickly when news was reported that rates were higher than expected, with S & P 500 and Nasdaq-100 futures falling 0.8% and 1.3%, respectively.

Bitcoin fell 3.5% from about $ 45,000 to $ 43,400, while Ethereum fell from about $ 3,250 to $ 3,100. Many other low-cap assets, including alternative Layer 1 coins Solana, Avalanche, and Terra, have been hit harder.

The overall downturn in the global market is in stark contrast to the news that US inflation reached record levels in November, when both Bitcoin and Ethereum recovered to record highs on the same day. The difference is that the 7.5% rise indicates that the Federal Reserve is likely to drive a significant rate hike as planned in 2022 (risk-on as higher interest rates lead to sharper borrowing costs. Assets tend to fall).

The Federal Reserve first signaled that interest rate hikes would come in December, and crypto assets were immersed in the news. Then, when Jerome Powell confirmed a rate hike in January, the market fell. Since then, the market has been volatile as both Bitcoin and Ethereum have maintained their momentum. It is 37.5% and 36.2% lower than the highest recorded in November, respectively.

Cryptocurrency followers hope that the market can recover without bleeding too much, as interest rate hikes are more likely to occur this year.

Disclosure: At the time of writing this, the author of this work owned ETH and several other cryptocurrencies.