Bitcoin and other digital assets plunged on Friday following the release of key inflation data that spooked investors. The leading cryptocurrency fell by 3% in just 24 hours, currently trading at $23,070, according to CoinGecko. This comes after Bitcoin broke above $25,000 per coin for the first time in eight months just last week. Other major cryptocurrencies also saw significant drops, with Ethereum falling by 3.1% in the past day to trade at $1,593, and Dogecoin dropping 3.3% to reach $0.082.
The cryptocurrency market’s downward trend is in line with the U.S. equities market, which experienced a shift in “risk-on” assets like stocks and digital assets following the inflation data release on Friday. Investors are now concerned that the U.S. Federal Reserve could impose more interest rate hikes in the near future, prompting them to sell off their assets.
According to Friday’s report, inflation in the world’s largest economy continues to surge. The personal consumption expenditures price index increased by 5.4% from last year, while the core metric rose by 4.7%. As a result, equities investors reacted by selling, with the Dow Jones Industrial Average dropping by 390 points (1.2%), the S&P 500 falling by 1.6%, and the Nasdaq Composite declining by 2%.
In contrast, Bitcoin’s value remained largely unaffected by the news. This is consistent with the cryptocurrency’s tendency to follow other volatile assets, such as tech stocks, when there are indications that the Federal Reserve may maintain its hawkish stance on monetary policy.
The Federal Reserve began raising interest rates last year in response to the U.S.’s 40-year high inflation rates. The central bank increased rates four times by 75 basis points before slowing down and raising them by 50 basis points.
Major cryptocurrencies are trading as follows as of 9 am IST, 25 February 2023:
Bitcoin: $23,416.82 USD
Tether: $1.02 USD
USD Coin: $1.00
BNB: $305.85 USD
XRP: $0.382 USD
Polygon: $1.28 USD
Polkadot: $6.71 USD
Tron: $0.06825 USD
Shibu Inu: $0.00001279