The crypto markets have taken a hit after the release of the U.S. January Consumer Price Index report, which indicated a higher inflation and consumer price surge than expected. The CPI rose by 0.5% month-on-month, measuring the cost of consumer products, raising inflation to 3.0%. The current CPI value was higher than the previous expectations of a 0.3% rise and inflation settling around 2.9%.
The U.S. Bureau of Labor Statistics also reported that CPI Core, which excludes energy and volatile food prices, rose 0.4% month-on-month, placing the year-on-year value at 3.3%. The rise was 0.1% higher than the predicted 0.3%, while the CPI Core value was 0.2% higher than the expected 3.1%. The inflation acceleration in January was higher than in the past three months.
Bitcoin dropped after the announcement to $94,250, over 2% lower than yesterday’s price. The coin has since then recovered above $95,500, but is still over 1.5% lower in the past 24 hours. Ethereum also dropped by over 2% to around $2,600, while Solana dropped by around 3.7% to around $192. Other coins, including DOGE, SUI, XRP, LINK, and XLM, were also in red after the CPI report’s release.
The crypto market cap has dropped by 1.58% overall to $3.14 trillion, while the Crypto Greed and Fear Index has dropped to 35 compared to yesterday’s 37. Stablecoins, including USDT and USDC, have still maintained their prices and stayed in the green zone. BNB, Monero, and Axie Infinity are some of the cryptos that have gained traction despite the market shakiness, gaining 3.49%, 0.7%, and 1.2%, respectively.
Traditional markets also suffer a blow post CPI report
Let me get this straight.
10Y yields are flying, meaning bonds are down.
Gold is down. Bitcoin is down. Stocks are down.
Bonds should be… up.
Markets are all over the damn place.
— The Wolf Of All Streets (@scottmelker) February 12, 2025
Recent MarketWatch data revealed that stocks and bonds have also suffered since the inflation announcement. The data highlighted that U.S. stock futures had dropped by about 1% each. The Dow Jones Industrial Average plunged by 1% to 44,269. The Nasdaq Composite and S&P 500 dropped by 1.1% and 1.2% to 6,028 and 21,529, respectively. Reuters mentioned that the drop in stock futures indices indicated a weak open on Wall Street.
U.S. stocks experienced a sharp selloff, with top stocks, including Nvidia, Meta, and Amazon, dropping significantly after the markets opened. Bond yields also spiked sharply after the announcement, with the 2-year yield surging to 4.37% while the 10-year yield spiked to 4.65%. Small companies’ stocks index, the Rusell 2000, fell by 1.4%, receiving a greater hit compared to large companies’ stocks.
Economists argued that the future indicators highlighted the possibility of inflation rising further in the coming months. According to FwdBonds chief economist Chris Rupkey, the inflation ‘nightmare’ was far from over for businesses, investors, and other consumers, adding that the inflation report was ‘bad news’ for the Federal Reserve officials.
The recent report also led to speculation about President Trump’s decisions on tariffs, which could increase consumer prices for imported goods in the U.S. The president expressed his intentions to raise tariffs on imports from Canada and Mexico by 25% while initiating 10% tariffs on all imports from China.
Inflation data leads to speculations on rate cuts
I’ve said it before and I will say it again.
The FED cut rates too early.
There was no reason to cut.
Inflation was falling, job numbers were strong and stocks were flying.
FED is backed into a corner.
— The Wolf Of All Streets (@scottmelker) February 12, 2025
The recent inflation rise has led to speculation that the Federal Reserve would rethink its rate cuts. The Fed faced backlash for its September rate cuts for the first time in four years, with mentions that the cuts were unnecessary.
The crypto analyst Scott Melker (The Wolf of All Streets) tweeted that the Fed rate cuts were too early and that the central bank had no need to take action. Melker reasoned that the inflation rate was steadily dropping, stocks were improving, and the job market was strengthening.
Orion’s Senior Investment Strategist Ben Vaske commented that the Fed would have to rethink its rate cut pace, referring to the 3 cuts initiated in Q4 last year. ClearBridge Investments analyst Josh Jamner agreed, saying that the current inflation report was ‘the final nail on the coffin’ and that the rate cut cycle was over.
President Trump has still expressed his interest in cutting rates further, despite the Fed’s chair Jerome Powell’s statement that the bank was putting a hold on rate cuts. The president suggested that interest should continue dropping in readiness for the suggested tariffs.
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