Shortly after the U.S. Bureau of Labor Statistics announced that the Consumer Price Index rose 0.4% in March, Bitcoin and Ethereum fell, each falling more than 2%.
This means inflation last month remained virtually unchanged from February, at 3.5%, according to new BLS data.
As of this writing, the price of Bitcoin is below $68,000 and the price of Ethereum is threatening to fall below $3,400. Both assets (arguably the two largest cryptocurrencies) account for approximately 65% of the $2.7 trillion global market capitalization of digital assets.
High inflation rates are bad news for the crypto market and, by extension, for stocks. This is because as long as inflation is high, the US Federal Reserve is unlikely to lower federal interest rates. The longer interest rates remain high, the stronger the argument will be for traditional safe assets like government bonds over crypto assets.
The bit of good news is that this morning's report is not completely unexpected, and volatility should come down.
Ahead of this morning's announcement, analysts had expected March figures to show inflation rose 3.4% compared to the same period last year. Core CPI inflation, which excludes volatile food and energy prices, was also expected to fall from 3.8% to 3.7% over the same period.
Federal Reserve Chairman Jerome Powell recently said at a Stanford University event that he is confident the Fed will not raise rates in the short term. But he added there was no need to rush to cut rates.
“It is too early to tell whether the recent inflation statistics are more than just an increase,” he said.
The U.S. Bureau of Labor Statistics released its latest employment report last week, showing that payrolls increased in March and the unemployment rate remained roughly flat at 3.8%. The news was not well-received by the cryptocurrency market, which was in the doldrums last week.
