Bitcoin Drops Below $95K as U.S. Inflation Data Surprises Markets

January CPI Report Sparks Market Volatility Across Crypto and Traditional Assets

Bitcoin prices fell sharply below the $95,000 mark on Tuesday following an unexpected rise in U.S. inflation, which also rattled stock and bond markets. The latest Consumer Price Index (CPI) report for January revealed inflationary pressures stronger than anticipated, dampening investor sentiment across various asset classes.

Inflation Exceeds Expectations

The U.S. Department of Labor reported that CPI rose 0.5% in January, exceeding economists’ forecasts of 0.3% and surpassing December’s 0.4% increase. On an annual basis, inflation reached 3.0%, slightly higher than the predicted 2.9% and December’s 2.9% reading.

Core CPI, which excludes volatile food and energy prices, also surpassed expectations. It climbed 0.4% in January, compared to the forecasted 0.3% and December’s 0.2% gain. Year-over-year, core inflation stood at 3.3%, higher than the 3.1% consensus estimate and December’s 3.2%.

Bitcoin and Financial Markets React

Bitcoin, already in a downtrend earlier this week, dropped significantly following the inflation data release, slipping below $95,000. The CoinDesk 20 Index, which tracks the performance of major cryptocurrencies, declined 2.9% over the past 24 hours.

Traditional markets also experienced turbulence:

• U.S. stock index futures fell roughly 1% in response to the data.
• The 10-year U.S. Treasury yield surged 10 basis points to 4.63%.
• Gold prices dropped more than 1%, while the U.S. dollar index rose 0.5%.

Bitcoin’s Trading Range and Market Factors

Since surpassing $100,000 in November following Donald Trump’s election victory, Bitcoin has fluctuated between $90,000 and $109,000 over the past two months. A mix of economic uncertainties—including artificial intelligence-driven market concerns in China, fears of trade conflicts, and persistently high interest rates—has tempered price momentum.

Federal Reserve Policy and Future Outlook

Federal Reserve Chairman Jay Powell, in congressional testimony on Monday, reiterated that further interest rate cuts remain unlikely in the near future unless the economy or inflation undergoes a significant downturn. The latest CPI data may now push markets to price in potential rate hikes in 2025, further pressuring Bitcoin and other risk-sensitive assets.

With inflation remaining sticky and interest rates expected to stay elevated, Bitcoin may face a test of the $90,000 support level in the coming weeks as investors reassess risk exposure in response to economic conditions.