Bitcoin Drops As US Inflation Data Exceeds Forecasts

Bitcoin BTC/USD dropped by 4.4% on Wednesday morning following a higher-than-expected Consumer Price Index (CPI) report for March.

What Happened: The CPI for March rose 0.4% on a monthly basis, exceeding the projected 0.3% increase and February’s 0.4%. The year-over-year CPI was up 3.5%, compared to the anticipated 3.4% and February’s 3.2%.

The core CPI, which excludes food and energy expenses, also saw a 0.4% rise in March, against the predicted 0.3% and the previous month’s 0.4%. The year-over-year core CPI was up 3.8%, versus the expected 3.7% and February’s 3.8%.

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Bitcoin is down 4.4% on Wednesday morning, trading around $67,650 following the release of this data. Traditional markets also responded, with the Dollar Index up 0.73%.

The higher inflation data has cast doubt on the possibility of a Federal Reserve rate cut this summer, which was expected to be a bullish catalyst for Bitcoin in 2024. Traders have now adjusted their expectations of rate cuts, with the CME FedWatch Tool indicating September as the most likely time for an initial rate cut.

Why It Matters: The unexpected rise in inflation has thrown a wrench into the hopes of a June rate cut.

This has significant implications for Bitcoin, as the anticipated rate cut was seen as a potential bullish catalyst.

Cryptocurrency analyst Benjamin Cowen expects the data to push Bitcoin dominance higher, while Michael van de Poppe sees the DXY rallying in the anticipation of no rate cuts in 2024.

What's Next: The influence of Bitcoin as an institutional asset class is expected to be thoroughly explored at Benzinga's upcoming Future of Digital Assets event on Nov. 19.

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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Image created using artificial intelligence with Midjourney.