Tuesday, February 13, 2024 (Hong Kong Time) – Bitcoin (BTC) stumbled below $49,000 today, shedding roughly 2% as hotter-than-expected US inflation readings dampened hopes for imminent interest rate cuts by the Federal Reserve.

The Consumer Price Index (CPI) report for January revealed a 3.1% year-on-year inflation rate, exceeding analysts’ predictions of 2.9%. This surprise jump significantly impacted market sentiment, triggering a shift away from riskier assets like Bitcoin.

According to the CME FedWatch Tool, the probability of the Fed cutting rates in May now stands at 34%, sharply down from 52% just a day prior. This diminished anticipation of easier monetary policy weighed heavily on both traditional and crypto markets.

The 10-year US Treasury bond yield, seen as a key indicator of interest rate expectations, jumped 12 basis points. Stocks also succumbed to the selling pressure, with the S&P 500 and Nasdaq Composite Index dropping as much as 2%.

Bitcoin and Rate Cuts:

Bitcoin has historically displayed a complex relationship with interest rates. While lower rates can increase the attractiveness of riskier assets like crypto, their influence is often intertwined with broader economic factors. In this case, the higher-than-expected inflation data overshadowed any potential benefit from looser monetary policy, resulting in the current selling pressure on Bitcoin.

Looking Ahead:

Investors will be closely monitoring upcoming economic data and Fed pronouncements for further clues regarding the trajectory of interest rates. If inflation continues to trend higher, the chances of a rate cut could diminish further, potentially impacting Bitcoin and other risk assets. Conversely, signs of cooling inflation or dovish rhetoric from the Fed could reignite optimism and trigger a rebound in Bitcoin prices.