Due to the new spot ETFs' massive demand for the cryptocurrency, Bitcoin bulls have gotten a break from worrying about the economy and Federal Reserve monetary policy thus far this year. That seems to be changing, for the time being anyway.
The February Producer Price Index (PPI), released on Thursday morning, provided more evidence that robust inflation is sticking around longer than predicted. Last month's PPI increase of 0.6% was twice as fast as January's increase and twice as fast as economists had predicted, according to the official data.
In February, the so-called core PPI increased 0.3%, which is lower than January's 0.5% but more than the 0.2% predicted increase. This index does not include food and energy prices.
Along with inflation increasing to 3.2% annually and the core rate to 3.8%, this week's Consumer Price Index (CPI) also came in faster than expected.
The yield on 10-year Treasuries has just increased to 4.30%, after flirting with falling below the 4% mark earlier this month. In tandem, the US dollar has reversed a downward trend that started in the middle of February, rising by around 1% last week, with a further 0.5% increase on Thursday. For risk assets such as bitcoin {{BTC}}, a rising dollar and increased rates are generally bad news.
There has been no letup in the reduction of expectations for significantly looser monetary policy in 2024. The market was expecting the Federal Open Market Committee to drop interest rates by as much as 150 basis points in 2024, with the first cut expected at next week's meeting.
. Neither that nor a reduction at the May meeting are any longer anticipated. In June, the CME FedWatch Tool predicts that the probabilities of lower rates have dropped to about 50%.
Following a 70% increase in 2024 to a new peak of around $74,000, bitcoin was certain to see a fall. Traders may have been given an excuse to lighten up by news concerning inflation, interest rates, and the currency.
Following Thursday morning's $73,800 high, bitcoin fell as low as $70,650 in the aftermath of the economic report. Trading at $70,900 as of press time, it had lost nearly 3% on the previous day. Gains in Dogecoin and Solana helped propel the wider CoinDesk 20 Index to outperform, falling just 1.7%.
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