Bitcoin slides amid hotter-than-expected US wholesale inflation

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The Block2024/05/14 14:55

By:Brian McGleenon

Bitcoin traded down after U.S. wholesale prices jumped 0.5% in April, another sign inflation remains sticky.Traders are looking at Tuesday’s PPI reading and Wednesday’s CPI data for clues on rates.

Bitcoin BTC -1.89% slid lower on Tuesday as April's U.S. wholesale inflation topped economists' expectations.

The largest digital asset by market cap has fallen below the $62,000 mark, having declined 1.6% in the past 24 hours to trade at $61,731 at 10:10 a.m. ET, according to The Block’s Price Page .

Bitcoin declined as hotter-than-expected U.S. wholesale inflation wobbled markets. Image: The Block.

According to the U.S. Bureau of Labor Statistics on Tuesday, the Producer Price Index (PPI) rose 0.5% in April. Economists had forecast a smaller 0.3% increase in PPI.

Traders will closely monitor this week's inflation readings

Traders will closely monitor Tuesday's PPI and Wednesday's Consumer Price Index (CPI) for clues regarding interest rates. According to Wintermute analysts, the U.S. Federal Reserve has set the threshold for initiating monetary easing at three consecutive softer inflation readings.

This week's hotter inflation data could provide insight into how the Federal Reserve might shape its monetary policy decisions in upcoming Federal Open Market Committee (FOMC) meetings.

The higher-than-expected wholesale inflation reading could add pressure on the U.S. central bank to maintain higher interest rates for a longer period, a scenario that would discourage investment in risk assets such as bitcoin.

Interest rate traders react to hotter inflation

After Tuesday's PPI print, the CME's FedWatch tool now forecasts a 29.2% chance of a rate cut at July's FOMC meeting and a 48.9% chance at September's meeting. Interest traders forecast a 91.3% chance that rates will remain unchanged at June's meeting.

"The FOMC has defined the bar to begin loosening monetary conditions as three consecutive softer inflation prints, we would expect a market response to any surprise beat or miss this week. Additionally, Powell is due to speak tomorrow which will be watched closely for additional policy hints," Wintermute OTC Trading Desk analysts said in an email sent to The Block.

The GM 30 Index , representing a selection of the top 30 cryptocurrencies, fell 2.18% to 126.96 in the same period.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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