Bitcoin Falls Below $24,000 As Crypto Traders Eye PCE Inflation Data
Bitcoin
and other cryptocurrencies fell on Friday, with digital assets poised to react to key economic data during the day as sentiment across both crypto and stocks remains sensitive to expectations of inflation and interest rate hikes.
The price of Bitcoin has fallen 2% in the past 24 hours to below $23,850. While Bitcoin is still up about 40% so far this year — a rally that has spurred calls for a new bull market — the biggest digital asset has fell in recent days from peaks above $25,000, levels that represent the highest point since last summer. Crypto traders await the release of January’s personal consumption expenditures (PCE) price index, which is the Federal Reserve’s preferred measure of inflation.
“As Wall Street swings over Fed rate hike expectations shift, Bitcoin is teetering around the $24,000 area,” said Edward Moya, analyst at broker Oanda.
While Bitcoin’s rally to start the year significantly outperformed the stock market, digital assets have largely fallen back in line with stocks, trading in line with
Dow Jones Industrial Average
and
S&P 500.
The correlation between crypto and stocks has hardened over the past year against a tough macro backdrop of high inflation and rising interest rates – forces that continue to weigh on sentiment for both asset classes.
Investors remain concerned about how much higher the Fed will raise interest rates this year in its bid to combat decades of high inflation. Higher prices dampen demand for risk-sensitive assets such as crypto and stocks, with the Fed’s dramatic tightening of financial conditions over the past year representing a major headache for investors.
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While the rally to start 2023 was largely based on optimism that the worst is over, mixed messages in economic data have fueled fears that inflation is more entrenched than once thought — and that the Fed will have to keep interest rates higher for longer. Markets are now pricing in higher interest rates through this year and increasing the chances that the Fed will deliver a big rate hike of 50 basis points next month.
That’s why PCE data due on Friday is in focus, because it could change expectations about the future of interest rates and influence the Fed’s next move. Bitcoin is likely to move in line with the broader stock market on the back of the data, due for release at 8:30 a.m. ET. Economists estimate that inflation as measured by PCE eased only slightly in January, so even if the data comes in as expected, it could still spook markets on concerns that there is a long road of higher interest rates to the Fed’s 2% inflation target.
Beyond Bitcoin,
Ether
—the second largest crypto lost 1% to below $1,650. Smaller cryptos or altcoins were also weaker, too
Cardano
crumbling 3% and
Polygon
plunges 4%. Memecoins showed much of the same, with both
Dogecoin
and
Shiba Inu
reduction 2%.
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Write to Jack Denton at [email protected]
