Bitcoin and other major cryptocurrencies declined on Monday following higher-than-expected US inflation data for January, raising concerns about delayed interest rate cuts from the Federal Reserve.
The world's largest cryptocurrency fell 1.3% to $94,081 after the US Consumer Price Index (CPI) showed inflation rose 3.0% year-over-year in January, exceeding economists' expectations of 2.9%. Core inflation, which excludes volatile food and energy prices, came in at 3.3% versus the forecasted 3.1%.
The crypto market's reaction reflects growing uncertainty around the Federal Reserve's timeline for potential interest rate cuts in 2024. During recent Senate testimony, Fed Chair Jerome Powell stressed there was "no rush" to reduce rates, highlighting the need for a careful approach while maintaining the central bank's 2% inflation target.
"With our current policy stance being less restrictive than before and the economy staying robust, we do not need to rush our policy adjustments," Powell told the Senate Banking Committee.
The market response saw widespread selling across digital assets, with altcoins following Bitcoin's downward trend. The crypto Fear & Greed Index moved back into "fear" territory, reversing recent positive sentiment.
Despite Bitcoin's traditional positioning as an inflation hedge, the cryptocurrency markets have shown increased sensitivity to US economic indicators and Federal Reserve policy decisions. The latest inflation figures suggest the Fed may maintain higher interest rates longer than markets previously anticipated.
During Powell's testimony, Senator Elizabeth Warren advocated for rate cuts at the March meeting, expressing concerns about potential economic impacts from sustained monetary tightening. However, the higher-than-expected January inflation data may complicate the path to near-term rate reductions.