Cryptocurrencies fell Tuesday amid a broader market sell-off following a hotter-than-expected CPI reading.
Bitcoin was down 3% to $48,535.17, according to Coin Metrics. The day before, it punched through the $50,000 mark to its highest level in more than two years.
The move began when the U.S. Bureau of Labor Statistics reported a bigger increase in the January consumer price index than economists surveyed by Dow Jones anticipated. That report sent yields higher, with the benchmark 10-year U.S. Treasury yield rising 10 basis points, and pressured risk assets as investors started to worry the Federal Reserve may not be able to cut rates several times this year as they previously expected.
“For the time being, we expect the cryptocurrency rally to continue,” said Nico Cordeiro, chief investment officer at Strix Leviathan. “However, investors should expect longer term weakness if inflation continues to run hotter than expected, which tends to run counter to the dominant belief that bitcoin is an inflation hedge.”
He also said he believes bitcoin is not an inflation hedge but rather a gauge on liquidity within the financial system.
The crypto exchange Coinbase fell 4% and bitcoin proxy Microstrategy lost 5%. Miners suffered losses, too, albeit mild compared to the previous day’s double-digit gains. CleanSpark and Iris Energy were lower by 4% each. Marathon Digital slid 9%, and Riot Platforms retreated by 5%.
Bitcoin remains hovered around $48,600, a level being watched by investors and chart analysts. Multiple closes above it would support new highs above $50,000 and potentially an all-time high. The coin hit its record of $68,982.20 on Nov. 10, 2021.
Elsewhere, ether and Solana’s SOL token outperformed, hovering slightly above the flat line after paring earlier gains.
Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank, noted that ether led the crypto rally on Monday when it rose 5.5% to its highest level in a month. He said the price has been buoyed by anticipation of ethereum’s next big tech upgrade in March, called Dencun, and renewed interest in NFTs, or non-fungible tokens, from the crypto community.
“The price may be ripe for some minor correction within a week or so, but its upward trend will likely continue due to improved demand through ETFs and technical sentiment,” he added.
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