Bitcoin and major altcoins have resumed the downtrend as investors reacted negatively to the new Consumer Price Index (CPI) inflation report released today.
Over the weekend, the largest crypto gained over 18% reaching the $22k price area. Other coins, like Ethereum, Solana, etc., followed suit, relieving the losses seen in the cryptocurrency market in the past few weeks.
Bitcoin, Ether erases recent gains amid CPI data
However, market sentiment has suddenly changed, as Bitcoin sharply dropped by more than 5%, currently trading at the lows of $21,000. Ethereum now sees losses of around 8.2% within the last 24 hours, including Cardano and Polkadot.
The recent drop in cryptocurrency prices follows the just-released US CPI data, which shows inflation is still brewing. The Bureau of Labor Statistics reported an 8.3% increase in the Consumer Price Index for August, accounting for about a 0.1% increase CPI inflation rate compared to the previous month.
The Consumer Price Index measures the overall change in the price of US consumer goods and services, such as gasoline, food, etc. The numbers revealed today fell short of predictions made by several analysts, who expected the report to come out lower than in July.
The US may still raise interest rates
The CPI report suggests inflation has not been tamed, and the Federal Reserve will continue to hawkishly raise interest rates, which is not good for the stock market and risk assets like cryptocurrencies. With higher interest rates comes an increase in dollar dominance or growth of the DXY (Dollar Index).
A strong dollar is not healthy for the crypto assets, as bitcoin and other coins have been inversely correlated with the DXY. The crypto market may likely continue to record lower prices as the dollar rises with hikes in interest rates by the Federal Reserve.
Bitcoin and Ether are currently trading at $20,914 and $1,589, respectively. It remains unknown whether the effect of the merge on Ether’s price will fall short of expectation due to the negative macro environment.