Bitcoin (BTC) experienced a 2.3% decline after the opening of Wall Street on March 12, as the market reacted to persistently high inflation in the United States and its potential impact on interest rate cuts in 2024.
According to data from Cointelegraph Markets Pro and TradingView, BTC dropped by as much as 6% after reaching a new all-time high of $73,054 on March 12, hitting a low of $68,636 on Bitstamp.
The drop in BTC price was in response to the February Consumer Price Index (CPI) data, which came in higher than expected at 0.4% in February, according to the U.S. Bureau of Labor Statistics (BLS). The year-on-year rate rose to 3.2%, surpassing estimates of 3.1% and January’s 3.1%.
The BLS’s official release stated that rising housing and gasoline costs accounted for over 60% of the monthly increase in the all-items CPI index.
Following the release of the CPI data, market participants began discussing the possibility of the Federal Reserve cutting interest rates in the coming months. According to the CME’s FedWatch tool, traders currently place the odds of a March rate cut at just 1%, compared to 15% on Feb. 12. This suggests that market participants believe the U.S. central bank will keep rates steady in March and May, with the possibility of a rate cut in June.
JPMorgan Chase CEO Jamie Dimon expressed his preference for the Fed to delay the decision to cut rates until later in the year. Speaking at the Australian Financial Review business summit in Sydney, Dimon emphasized the importance of making decisions based on data and cautioned that rates may remain high for some time.
Inflation concerns were highlighted by trading resource The Kobeissi Letter, which pointed out that core services inflation excluding housing saw a significant jump of 0.7% month-over-month in February, the largest increase since September 2022. This metric continued to rise by 0.5% month-over-month in February after multiple increases in 2023.
Despite inflation concerns, inflows into Bitcoin exchange-traded funds (ETFs) have helped mitigate the sell-off driven by inflation. The price of Bitcoin has recovered to above $71,000 at the time of writing, with inflows into spot Bitcoin ETFs totaling around 55.78K BTC ($3.68B) in the past week, according to data from Arkham.
Market analysts also noted positive trends in increasing ETF flows, with half a billion in net inflows on March 11. BlackRock’s iShares Bitcoin Trust (IBIT) leads the pack, holding Bitcoin worth $14.76 billion, followed by Fidelity’s Wise Origin Bitcoin Fund (FBTC) with over $9.26 billion in BTC under management. The ARK 21Shares Bitcoin ETF (ARKB) ranks third, holding about $1.8 billion worth of Bitcoin.
In contrast, Grayscale Bitcoin Trust (GBTC) has seen outflows totaling $11.04 billion over the past eight weeks, with $494.1 million in outflows on March 11, the highest daily volume of capital withdrawals since Jan. 23.
This article is for informational purposes only and does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.