- US CPI for February decreased to 2.8%, falling short of market expectations of 2.9%.
- Bitcoin climbed above $84,000 following the inflation data release, rebounding from recent declines.
- Nonetheless, the prospect of retaliatory tariffs from US trading partners impacted the market, erasing most of the gains made post-CPI release.
On Wednesday, Bitcoin is trading around $83,000 amid ongoing global trade tensions between the US and its international partners. The leading cryptocurrency and various other altcoins have lost most of their earlier gains, which were driven by the lower-than-anticipated US Consumer Price Index (CPI) data for February.
Crypto market remains steady despite lower-than-expected February CPI
The monthly CPI data for February released by the United States Bureau of Labor Statistics (BLS) revealed that it fell below expectations across all essential metrics.
Headline CPI increased to 2.8%, under the forecasted 2.9%. The Core CPI — excluding food and energy prices — eased to 3.1%, lower than the anticipated 3.2% and January’s 3.3%. On a month-to-month basis, both CPI figures recorded a rise of 0.2%, marking the first instance since July where both measures were below market predictions.
The crypto market experienced a temporary rise following the disappointing CPI data, with Bitcoin surpassing $84,000 and numerous altcoins enjoying double-digit gains. The S&P 500 and the Nasdaq 100 also noted slight increases.
Historically, a lower CPI tends to favor the crypto and stock markets, as it signals the Federal Reserve (Fed) might lean towards maintaining a low-interest-rate environment, benefiting risk assets.
However, both Bitcoin and the S&P 500 quickly relinquished most of their early-day gains, as weak investor sentiment appeared to pressure the market. This followed President Donald Trump’s announcement of new tariff threats and ensuing pressures on international trading partners.
“The subdued reaction in major equity indices reflects that market optimism is hindered by ongoing risks such as tariff pressures and uncertainties regarding growth,” stated Mike Marshall, Head of Research at Amberdata, in an interview with FXStreet.
On Monday, President Trump enacted new 25% tariffs on all steel and aluminum imports from Canada, to which Canada retaliated with tariffs on $21 billion worth of US products on Wednesday.
Trump also warned he would respond to the European Union’s newly announced retaliatory tariffs, declared earlier on Wednesday.
The EU unveiled tariffs on $28 billion worth of US goods in retaliation for Trump’s 25% duties on steel and aluminum imports into the United States, leading to a market sentiment inclined towards a risk-off strategy.
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 cancelled.
3. CPI Inflation As Expected: Sell stocks, inflation is not falling.
Sentiment is incredibly…
— The Kobeissi Letter (@KobeissiLetter) March 12, 2025
With the trade war’s impact on crypto, coupled with increasing correlations to the stock market, Bitcoin may continue its downward trend in the near future.
“There’s increasing speculation regarding a recession, which is fueling market volatility. Recent remarks from the President acknowledging this risk have only heightened the uncertainty,” remarked Anastasija Plotnikova, CEO of Fideum, in a note to FXStreet.
“The crypto market remains highly reactive—while easing inflation may enhance risk appetite, any economic slowdown or sudden inflation surge due to tariffs could disrupt the current stabilization,” she further noted.
The total market capitalization of cryptocurrencies has declined by 2.2% at the time of this writing.
