Bitcoin prices continue to suffer from low volumes and a lack of investor interest.
Dreamstime
Bitcoin
and other cryptocurrencies wobbled on Wednesday after the release of key U.S. inflation data, which could point toward the Federal Reserve keeping interest rates higher for longer, heaped more pressure on rate-sensitive digital assets.
The price of Bitcoin was near flat over the past 24 hours but fell from $26,200 to $26,100 after the release of the U.S. consumer-price index (CPI) for August. The largest digital asset continues to hover near the $26,000 level that has provided support for much of the past month amid a historically quiet period for crypto trading with volumes and volatility at multi-year lows.
CPI rose 3.7% annually in August, ahead of economists’ expectations of 3.6% growth.
Like the
Dow Jones Industrial Average
and
S&P 500
in the stock market, cryptos were poised to move on the back of CPI data because of how influential the release is on expectations for the future of interest rates. While traders expect the Federal Reserve to hold borrowing costs steady this month, expectations for the central bank’s move in November remain in flux. Hotter-than-expected inflation data in the interim will only raise bets that the Fed is going to remain hawkish, with rates staying higher for longer.
Higher rates are essentially bad for cryptos, because when risk-free assets like cash or Treasuries yield more, investors have fewer incentives to pile into riskier bets like digital assets. If rates move to a fresh generational peak in November and stay elevated through more of 2024 than once thought, it is likely to add pressure to cryptos.
Beyond Bitcoin,
Ether
—the second-largest crypto—lost less than 1% to around $1,600. Smaller cryptos or altcoins were more mixed, with
Cardano
down less than 1% and
Polygon
less than 1% higher. Memecoins were weaker, with
Dogecoin
and
Shiba Inu
each shedding about 1%.
Write to Jack Denton at [email protected]
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