Bitcoin experiences a 2% decrease following higher-than-anticipated U.S. inflation.

Bitcoin faced a setback, sliding below $49,000, following a U.S. inflation report that exceeded analyst predictions. The January Consumer Price Index (CPI) revealed a 3.1% year-on-year inflation, surpassing the anticipated 2.9%. This unexpected inflation surge impacted expectations for imminent interest-rate cuts, leading to a decline in Bitcoin prices.

The largest cryptocurrency, Bitcoin, experienced a 2% drop from its earlier position above $50,000, settling at $48,700. While there was a partial recovery to $49,100 later in the day, most CoinDesk 20 Index (CD20) constituents remained down by 2%-3% over the past 24 hours. Notably, Solana’s native token (SOL) displayed more resilience, gaining over 1% during the same period, while BTC experienced a 1.5% decrease.

U.S.-listed stocks focused on cryptocurrencies initially faced a downturn upon market opening but managed to recover some losses later in the day. Coinbase (COIN) and MicroStrategy saw roughly 3% declines from Monday’s closing prices, while major BTC miners Marathon (MARA) and Riot Platforms (RIOT) experienced 5% and 2% decreases, respectively.

The inflation report prompted a shift in expectations, with the CME FedWatch Tool indicating a reduced likelihood of a Federal Reserve interest rate cut in May. The probability fell to 34% from 52% the previous day, impacting both traditional markets and cryptocurrencies. The 10-year U.S. Treasury bond yield rose by 12 basis points, and the S&P 500 and Nasdaq Composite Index declined by up to 2%.

Craig Erlam, a senior analyst at OANDA, expressed concerns about the inflation report’s timing, coinciding with Bitcoin breaking the $50,000 level on Monday. Despite the short-term impact, Erlam remains optimistic about the overall sentiment in the crypto space, suggesting that while the report may have caused a temporary setback, it is unlikely to significantly dampen the mood in the long run.