After US wholesale inflation for April surprised economists, Bitcoin took a dive on Tuesday.
The market capitalization of the most valuable digital asset dropped below $62,000, a decline of 1.6% over the past 24 hours.
The PPI increased 0.5% in April, according to Tuesday’s report from the U.S. Bureau of Labor Statistics. The 0.3% increase in the producer price index was less than what economists had predicted.
The rate of inflation is going to be closely monitored by traders this week.
Investors will be keeping a careful eye on Tuesday’s Consumer Price Index (CPI) and Wednesday’s CPI for clues about interest rates. The US Federal Reserve has established a starting point for monetary easing at three consecutively softer inflation targets, according to analysts at Wintermute.
If inflation data comes in higher than expected this week, it might influence the Federal Reserve’s monetary policy decisions at the next FOMC meeting.
The Federal Reserve may feel pressured to keep interest rates higher for a longer length of time if wholesale inflation figures come in higher than anticipated. Bitcoin and other risky assets will see less investment under these conditions.
Traders in interest rates respond to inflationary pressures
In light of the Producer Price Index data released on Tuesday, the FedWatch tool at CME now predicts that the FOMC will have a 29.2% probability of cutting interest rates at their July meeting and a 48.9% probability at their September meeting. There is a 91.3% probability, according to interest rate traders, that rates will stay unchanged at the June meeting.
As three consecutive reductions in inflation meet the criteria set by the FOMC, monetary conditions will begin to be eased. This week, the market is likely to respond to any sudden increases or decreases. Analysts at Wintermute OTC Trading Desk said in an email that Powell is scheduled to speak tomorrow and that the speech will be closely watched for any additional policy hints.
A representative sample of the 30 biggest cryptocurrencies, the GM 30 Index, declined 2.18 percent to 126.96 during the same time frame.