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Negative economic data has triggered a new downturn for cryptocurrency investors. The Federal Reserve is grappling with increasing difficulties as the latest inflation report has led to a sharp decline in Bitcoin’s price. With altcoins struggling to recover, a larger wave of losses is now being witnessed.
What’s Behind the Drop in Cryptocurrencies?
The U.S. Consumer Price Index (CPI) reflected a 0.5% monthly increase, surpassing expectations of a 0.3% rise. Inflation came in at 3% against a forecast of 2.9%, causing Bitcoin 
$94,594’s value to plummet to $94,200. Meanwhile, Ethereum 
$1,769 has reverted to around $2,500, with altcoins experiencing losses nearing 5% across the board.
Investors anticipate the first and only rate cut of the year in December, pushed back from earlier expectations of a May reduction. Fuel prices surged by 6.2% in January, with only clothing products seeing a decline.
“The shelter index rose by 0.4% in January, accounting for about 30% of the overall monthly increase. The gasoline index increased by 1.8%, while the energy index rose by 1.1% throughout the month. The food index also climbed by 0.4%, influenced by a 0.5% rise in the index for food at home and a 0.2% increase for food away from home.” – January CPI Report
Expectations for rate cuts from the European Central Bank have also diminished, with a risk of continued declines following the negative opening of U.S. markets about an hour later. The outlook suggests that cryptocurrency investors may face several more weeks of adverse conditions, and any potential increase in inflation will further impact losses, depending on how Federal Reserve members address these concerns.
