Bitcoin price weakens after hot CPI print raises doubt on Fed rate cuts

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Bitcoin (BTC) price witnessed a 0.5% drop at the Wall Street open on April 10, as markets responded to the United States Consumer Price Index report printing higher-than-expected figures. 

BTC/USD daily chart. Source: TradingView

Federal Reserve’s June rate cut likely gone after today’s CPI print

Data from Cointelegraph Markets Pro and TradingView shows that the BTC price dropped as much as 2.5% from the April 10 opening at $69,115 to an intra-day low of $67,463 on Coinbase.

Bitcoin’s price reacted to the March Consumer Price Index (CPI) data, which exceeded expectations. The inflation in March rose 0.4% month-on-month and 3.5% year-over-year, versus 0.3% monthly increase and 3.4% year-over-year estimates from the Dow Jones economists survey.

Core CPI, which excludes volatile food and energy prices, climbed 0.4% from February while rising 3.8% from a year ago, compared to estimates of 0.3% and 3.7%, respectively. In March, CPI increased at an annual rate of 3.2% for all items.

“The index for shelter rose in March, as did the index for gasoline. Combined, these two indexes contributed over half of the monthly increase in the index for all items. The energy index rose 1.1 percent over the month. The food index rose 0.1 percent in March. The food at home index was unchanged, while the food away from home index rose 0.3 percent over the month,” read an official press release from the U.S. Bureau of Labor Statistics.

CPI % change chart. Source: U.S. Bureau of Labor Statistics

Market participants immediately began debating the possibility of the Federal Reserve lowering interest rates in the coming months, shifting their timing from June to later in the year.

According to the CME’s FedWatch tool, traders are placing the odds of a June rate cut at just 20.6% at the time of writing versus 45.9% for September. This means market analysts are betting that the U.S. Federal Reserve will hold rates steady in May and June, with the first possible cut being made in September.

Target rate probabilities for June 12, 2024 Fed meeting. Source: CME

“Interest rate futures are now pricing in just 2 interest rate cuts for the entire 2024,” trading resource The Kobeissi Letter wrote in part of a reaction on X.

“Odds of a rate cut in June are down from ~60% before the CPI report to ~22% now.”

Kobeissi Letter added that this is the first time in history that markets are “pricing in less rate cuts” than the guidance given by the FED.

Inflation data accompanies negative spot Bitcoin ETF flows despite upcoming halving

Meanwhile, the tapering off of inflows into the spot Bitcoin exchange-traded funds (ETFs) is dampening the short-term outlook of Bitcoin investors.

April 9 outflows from the Grayscale Bitcoin Trust (GBTC) totaled around $154.9 million, according to data compiled by BitMEX Research.

Overall, spot Bitcoin ETFs saw net outflows of $18.7 million, marking the second consecutive day of negative inflows.

Bitcoin ETF flow table. Source: BitMEX Research

BlackRock’s iShares Bitcoin Trust, IBIT, had the highest inflow totaling $128.7 million. Bitwise’s ETF, BITB, and Fidelity’s Wise Origin Bitcoin Fund, FBTC, came in second and third with over $3.8 million and 3 million in inflows, respectively. There was no capital inflow into the rest of the ETFs on April 10.

Slowing spot Bitcoin ETF inflows indicate a decrease in investors’ interest in the investment products as caution kicks in. Nevertheless, the market remains optimistic about the BTC’s upside potential after the Bitcoin halving event, which is less than ten days away.

Vijay Pravin Maharajan, founder and CEO of bitsCrunch, acknowledges the importance of the upcoming miner reward halving event, saying that it could “not only propel BTC to new all-time highs but also positively impact various other assets.”

“Consequently, investors might anticipate a reinitiation of the bull market in the latter half of Q2.”