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Bitcoin, Ethereum Fluctuate as US Inflation Hits 8.5%, Slightly Above Expectations

Fredrik Vold
Last updated: | 3 min read
Source: Adobe/noskaphoto


The price of both bitcoin (BTC) and ethereum (ETH) moved higher before reversing lower today as inflation for March accelerated to 8.5% compared to the same month last year, slightly exceeding analysts’ expectations. The number was also up markedly from February’s reading of 7.9%.

“The all items index continued to accelerate, rising 8.5 percent for the 12 months ending March, the largest 12-month increase since the period ending December 1981. The all items less food and energy index rose 6.5 percent, the largest 12-month change since the period ending August 1982,” the US Bureau of Labor Statistics wrote in its latest inflation report.

While the headline inflation came in slightly above expectations, core CPI came in slightly below it. Analysts’ expectation for the headline inflation last month was 8.4%, while the core CPI was expected at 6.6%, once again marking the highest inflation in the US since the early 1980s.

Headline inflation is the commonly quoted inflation number that includes all consumer prices, while core CPI excludes prices on food and energy.

US headline inflation rate last 10 years:

The BTC price initially reacted to the slightly higher-than-expected inflation reading by moving about 0.7% higher in the first 10 minutes after the release, while ETH saw a spike of about 1.5%. However, the market later reversed to the downside, with BTC once again dipping testing the key USD 40,000 level.

At 14:30 UTC, BTC was down 1.3% since the announcement, trading at USD 39,850. Meanwhile, ETH was down by 0.5% over the same time period to USD 3,019.

At the same time, the S&P 500 stock index was up by 0.85% for the day.

Ahead of the release of the inflation number, crypto markets were already trimming losses after heavy selling on Monday. Similarly, S&P 500 stock index futures in the US also pointed up slightly after a red day yesterday.

According to Marcus Sotiriou, an analyst at the UK-based digital asset broker GlobalBlock, the recent weakness in the crypto market can mainly be put down to the current macro headwinds at hand.

“With soaring inflation, retail investors do not have enough money to invest significant amounts in what they deem as ‘risky’ assets like cryptocurrencies,” he said in an emailed note.

Today’s inflation report comes after energy prices in particular have risen strongly in the wake of Russia’s full-scale attack on Ukraine, which began on February 24.

The figure was also released after White House spokesperson Jen Psaki yesterday said the administration expects headline inflation for March to be “extraordinarily elevated.”

Psaki added that they expect to see “a large difference between core and headline inflation,” and that this comes as a result of disruptions to global energy and food markets as a result of the war in Ukraine.

Commenting ahead of the release of today’s inflation number, the former Twitter CEO and current CEO of payments firm Block, Jack Dorsey, hinted that the official response to the high inflation is one of “deception and zero accountability.”

“It’s not the party, it’s the system,” he said.

Commenting to the Wall Street Journal ahead of the release, Blerina Uruci, US economist at investment management firm T. Rowe Price Group Inc., said inflation now has “strong momentum across the board,” and that it affects both goods and services.

“To me, this is a red flag. The other red flag is Russia’s invasion of Ukraine and the rise of Covid in China. Those pose risks that the so-called normalization of supply chains takes longer to materialize,” Uruci was quoted as saying.

Meanwhile, other analysts say they believe the high inflation reading in March represents a peak for the current cycle of elevated inflation.

“[We] believe CPI will peak in March (also peaking on a quarterly basis with Q2 @ 7.9% yr/yr) as higher year-ago base effects take hold and the pace of overall economic growth slows which should lead to price growth easing on a sequential basis this summer,” Sam Bullard, managing director, and senior economist at banking giant Wells Fargo, said in a note on Sunday cited by U.S. News.
Learn more: 
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How War in Ukraine Is Increasing Inflationary Pressure Across World’s Regions
Fed Can’t Stop Prices From Going Up Anytime Soon, But There’s Good News, Too

‘New Inflationary Era’ Upon Us, Central Bank Action Will be Unpopular – BIS’ Carstens Warns
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(Updated at 14:38 UTC with the latest market data.)