Crypto Market Recovers After CPI Report Rattles Investors

The cryptocurrency market is having a volatile Wednesday as higher-than-expected US inflation data reignited investor concerns over Federal Reserve policy and dampened hopes for near-term interest rate cuts.

Bitcoin (BTC) dipped to $94,400 before recovering to $97,000. Ethereum (ETH) climbed 2% in the past 24 hours to approximately $2,660. XRP gained 2% to $2.45, and Solana (SOL) slid 2% to $193, according to CoinGecko.

The total crypto market cap is down 0.5% in the last 24 hours to $3.32T. Amid the volatility, 139,585 traders were liquidated for $303M, with BTC accounting for $78M, ETH for $56M, and altcoins collectively for $46M, according to CoinGlass.

Experts attributed the sell-off to higher-than-anticipated inflation figures, which have dampened hopes for imminent interest rate cuts by the Federal Reserve and led to a decline in both traditional and crypto markets.

CPI Dampens Sentiment

Early Wednesday, the Consumer Price Index (CPI), which tracks the cost of goods and services across the US economy, rose by a seasonally adjusted 0.5% in January. This pushed the annual inflation rate to 3%, according to the Bureau of Labor Statistics (BLS).

Both figures came in higher than Dow Jones estimates of 0.3% monthly growth and a 2.9% annual rate. The yearly inflation rate also edged up by 0.1% from December’s 2.9%.

“The ‘wait and see’ Fed is going to be waiting longer than anticipated after a red-hot January CPI inflation report,” wrote Josh Jammer, investment strategy analyst at ClearBridge Investments, according to CNBC. “This report puts the final nail in the coffin for the rate cut cycle, which we believe is over.”

Meanwhile, prominent crypto investor Ash Crypto (@Ashcryptoreal) called today’s market movements “just short-term volatility” in a post on X. “There is no major difference between 2.9% and 3.0%,” the investor noted. “CPI jumped 0.1% because OIL prices increased in Jan.”

Nic Puckrin, financial analyst, investor, and founder of The Coin Bureau, echoed this sentiment, calling the US CPI index rise not that surprising, “considering January often sees seasonal price increases.”

Puckrin also emphasized that it would be an error to attribute this to President Donald Trump’s tariffs. Around a week ago, Trump announced tariffs on China, Mexico, and Canada, resulting in several days of volatility in the cryptocurrency market.

“Regardless, I don’t expect today’s reading to influence the Federal Reserve’s interest rate decision in March,” Puckrin said. “Rather, the Fed will be watching unemployment figures coming out on March 7, as well as its preferred inflation measure – the PCE index – on February 28.”