An image of bitcoin and U.S. currencies is displayed on a screen during the Interpol World Congress in Singapore on July 4, 2017.
Roslan Rahman | AFP | Getty Images
Cryptocurrencies fell Tuesday amid a broader market sell-off following a hotter-than-expected CPI reading.
Bitcoin was last lower by 0.8% at $49,658.57 according to Coin Metrics. Earlier, it sunk as low as $48,372.89. On Monday it punched through the $50,000 mark to its highest level in more than two years.
Tuesday’s down move began when the U.S. Bureau of Labor Statistics reported a bigger increase in the January consumer price index than economists surveyed by Dow Jones anticipated. That report sent yields higher, with the benchmark 10-year U.S. Treasury yield rising more than 10 basis points, and pressured risk assets.
“Bitcoin is an aspirational store of value … and therefore its price is in part influenced by monetary policy,” said Jurrien Timmer, Fidelity Investments’ director of global macro. “The CPI report came in hot and suggests that the Fed is further away from a pivot than was priced in. That suggests higher nominal and real rates for longer, which in theory diminishes the urgency to hold a store of value.”
Nico Cordeiro, chief investment officer at Strix Leviathan, said he expects the crypto rally to continue despite Tuesday’s pause.
“However,” he added, “investors should expect longer term weakness if inflation continues to run hotter than expected, which tends to run counter to the dominant belief that bitcoin is an inflation hedge — it is not, it’s a gauge on liquidity within the financial system.”
Bitcoin falls to key $48,000 level
The crypto exchange Coinbase fell 4.7% and bitcoin proxy Microstrategy lost 4.39%. Miners trimmed earlier losses but remained under pressure. CleanSpark and Iris Energy were lower by less than 1% each after falling as much as 4%. Marathon Digital slid 5.72%, and Riot Platforms retreated by 3.02%.
Bitcoin remains above $48,600, a level being watched by investors and chart analysts. Multiple closes above it would support new highs above $50,000 and potentially an all-time high. The coin hit its record of $68,982.20 on Nov. 10, 2021.
Elsewhere, ether hovered at the flat line while Solana’s SOL token gained 1.79%.
Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank, noted that ether led the crypto rally on Monday when it rose 5.5% to its highest level in a month. He said the price has been buoyed by anticipation of Ethereum’s next big tech upgrade in March, called Dencun, and renewed interest in NFTs, or non-fungible tokens, from the crypto community.
“The [bitcoin] price may be ripe for some minor correction within a week or so, but its upward trend will likely continue due to improved demand through ETFs and technical sentiment,” he added.
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