Bitcoin Plummets as CPI Data Surprises with Higher Figures

Bitcoin experienced a 2.3% decrease in value after the opening of Wall Street on March 12. This drop was a response to the high inflation rates in the United States and the potential impact it could have on interest rate cuts in 2024. The Consumer Price Index (CPI) data for February showed higher-than-expected inflation at 0.4%, with a year-on-year rate of 3.2%. Rising shelter and gasoline costs were the major contributors to this increase.

Following the release of the CPI data, there has been speculation about the possibility of the Federal Reserve lowering interest rates in the near future. Market participants are currently placing a low probability of a rate cut in March, with the first possible cut predicted for June. JPMorgan Chase CEO Jamie Dimon suggested that the decision to cut rates should be delayed until later in the year, allowing time for more data to be collected.

Despite concerns about inflation, the influx of investments into Bitcoin exchange-traded funds (ETFs) has helped alleviate the sell-off driven by inflation fears. The price of Bitcoin has already recovered above $71,000. Data from Arkham, a crypto intelligence firm, shows that there have been significant inflows into Bitcoin ETFs, with around 55.78K BTC ($3.68B) being invested in the past week. BlackRock’s iShares Bitcoin Trust holds the largest amount of Bitcoin, valued at $14.76 billion, followed by Fidelity’s Wise Origin Bitcoin Fund with over $9.26 billion in BTC under management.

There have been outflows from the Grayscale Bitcoin Trust, with a total of $11.04 billion being withdrawn over the past eight weeks. On March 11 alone, there were outflows of $494.1 million, the highest daily volume of capital withdrawals since January 23.

Bitcoin experienced a drop in value due to concerns about high inflation in the United States and its potential impact on interest rate cuts. The influx of investments into Bitcoin ETFs has helped stabilize the market. Despite this stability, there are still concerns about inflation, and market participants are closely watching for any changes in interest rates.