- The US CPI for February declined to 2.8%, falling short of market forecasts of 2.9%.
- Bitcoin surged past $84,000 after previously declining, following the inflation data release.
- Nonetheless, impending retaliatory tariffs from US trading partners pressured the market, erasing most of the gains made after the CPI announcement.
Bitcoin is trading around $83,000 on Wednesday amidst rising trade tension between the US and its global trading partners. The leading cryptocurrency, along with several others, has relinquished much of the day’s earlier gains triggered by lower-than-anticipated US Consumer Price Index (CPI) figures for February.
Crypto market remains steady despite below-expectation CPI results for February
February’s CPI data from the United States fell short of projections across all key areas, according to the Bureau of Labour Statistics.
The headline CPI increased to 2.8%, missing the expectations of market analysts who anticipated 2.9%. The Core CPI, which excludes volatile food and energy prices, also eased to 3.1%, lower than estimates of 3.2% and January’s figure of 3.3%. On a month-over-month basis, both CPI indicators increased by 0.2%. This is the first occurrence since July that both headline and Core CPI have disappointed market forecasts.
Following the subdued CPI data, the cryptocurrency market experienced a brief surge, with Bitcoin climbing above $84,000 and several altcoins showing double-digit gains. Concurrently, the S&P 500 and Nasdaq 100 also posted minor increases.
Historically, lower CPI figures have been advantageous for both the crypto and stock markets, as they lead the Federal Reserve to favor a low-interest-rate environment, which benefits risk assets.
However, Bitcoin and the S&P 500 quickly reversed most of their earlier gains as a sense of weak investor sentiment continued to affect the market. This was spurred by new tariff threats from President Trump directed at international trading partners.
“The limited response in major equity markets illustrates that market optimism is being suppressed by ongoing concerns like tariff pressures and uncertainties surrounding growth,” stated Mike Marshall, Head of Research at Amberdata.
Earlier this week, President Trump initiated new 25% tariffs on all steel and aluminum imports from Canada. Canada then responded with retaliatory tariffs on $21 billion worth of US products.
Trump further warned of actions against the European Union’s new retaliatory measures, announced earlier on Wednesday.
The EU introduced new tariffs on $28 billion of US goods in response to Trump’s 25% trade levies on aluminum and steel. Consequently, market sentiment appears to be shifting towards a more cautious approach.
Current market mentality:
1. CPI Inflation Lower Than Expected: Sell stocks, we are entering a recession.
2. CPI Inflation Higher Than Expected: Sell stocks, rate cuts are canceled.
3. CPI Inflation As Expected: Sell stocks, inflation is not decreasing.
Sentiment is extremely…
— The Kobeissi Letter (@KobeissiLetter) March 12, 2025
Given the impact of the trade war on cryptocurrencies and the increasing interlinkages with the stock market, Bitcoin might continue its downward trend in the near future.
“Speculation about a potential recession is on the rise, leading to increased market volatility. Recent remarks from the President acknowledging this risk have only heightened uncertainty,” expressed Anastasija Plotnikova, CEO of Fideum, in a note.
“Cryptocurrencies remain highly reactive — while easing inflation supports a risk-taking demeanor, any economic downturn or a sudden inflation spike due to tariffs could disrupt the current stabilization,” she added.
As of this moment, the entire cryptocurrency market cap has decreased by 2.2%.