Ethereum and Bitcoin Decline As United States Inflation Stuck at 3.5%

The prices of Ethereum and Bitcoin fell significantly when data showing that United States inflation, which is currently at 3.5%, was released. The announcement rocked the cryptocurrency market as investors struggled to understand how inflation might affect the value of digital assets.

According to the United States Bureau of Labor Statistics’ most recent inflation data, the Consumer Price Index (CPI) increased by 3.5% over the previous year, which was earlier predicted by industry experts. Fears of a possible Federal Reserve tightening of monetary policy, which can include interest rate hikes to combat inflation, were stoked by the ongoing inflationary pressure.

Statistics containing the United States employment by the United States Bureau of Labor Statistics, which also comes with payrolls, had an upsurge in March, while the data for the unemployment rate remained rigid at 3.8%.

Powell Assures Federal Reserve Commitment to Reviving the Economy

The Federal Reserve boss also reaffirmed the Fed’s commitment to advancing the economic recovery and fulfilling its twin mandate of maximum employment and price stability. Despite Powell’s promises, investors are still deciding about the possibility of rising interest rates in the future.

The inflation figures and worries about possible Federal Reserve actions caused a sharp and immediate reaction in the cryptocurrency market, with prices for Bitcoin and Ethereum slightly dipping. As of press time, Bitcoin trades at $69,766.41, with a market capitalization rising by 0.84%  to reach $1,372.94 billion.

The trading volume has dropped 0.40% to $36,164,177,824 in the last 24 hours, according to data from CoinMarketCap. Ethereum currently trades at $3,534.86, a 0.78% increase, with a market capitalization of $420,776,467,067, representing a mere 0.1% drop. It has a trading volume of $16,380,213,869, representing a 12.05% drop.

Low Performance in Ethereum and Bitcoin Linked to Increased Monetary Policy 

Stacy Elliott, a market watcher had explained on Decrypt that investors often turn to cryptocurrencies as alternative repositories of wealth when fiat currencies and traditional assets lose purchasing power due to inflationary pressures and the possibility of tighter monetary policy.

The central bank is working on curbing the inflation rate and returning it to the 2% rate. Some institutional investors who predicted a six-year drop in the rate this year are currently expecting three different 25 point cuts. This development is seen as a reflection of the difficulty the Federal Reserve encounters while managing the pressure that comes with regulating the inflation rate.

Conventional financial marketers have reacted to the inconsistency in the inflation figures, with the  Standard and Poor (S&P) 500 and NASDAQ 100 futures shaking around the 1.5% mark. On the other hand, the United States 10-year treasury increased by 13 points to 4.50% alongside the dollar index, which also increased by 0.5%. 

Experts Predict 3.4% Rise in Inflation Rate, Rates Remain Stable

The decrease in the value of Bitcoin and Ethereum subsequent to the disclosure of United States inflation statistics highlights the intricate relationship between macroeconomic variables and cryptocurrency markets.

According to market data for March published on the Decrypt platform, industry experts have forecasted that there would be a 3.4% rise in the inflation rate compared to what was applicable in 2023. The main Consumer Price Index (CPI) inflation rate excludes the volatile price of energy and food, which is expected to dip from 3.8% – 3.7% at the same time.

Jerome Powell, the Federal Reserve Chairman, in his speech at a recent event at Stanford University, said that he’s hopeful that the Federal Reserve won’t increase the dollar rate in the future. He added that his organization is not in a haste to reduce the rates.

Powell stated that any decision to raise rates would be the result of an intense analysis of economic data and indications. Meanwhile, the gross capitalization for the cryptocurrency industry market capitalization is currently at $2.53 trillion, with the Bitcoin curbing up  52.6% of the market share.