Crypto Market Dips as Fed’s Inflation Data Fails to Impress

The crypto market is under selling pressure following new economic data, with most assets declining sharply. The Federal Reserve’s preferred inflation gauge, the personal consumption expenditures price index, remained unchanged for the first time in nearly a year. Bitcoin and Ethereum, alongside many other cryptocurrencies, have all seen drops as the market reassesses risks, correlating with a downturn in U.S. stocks.

The crypto market is facing notable selling pressure as fresh economic data raises concerns among investors. Most cryptocurrencies have seen declines, especially after the release of the personal consumption expenditures price index (PCE) for March, which is the Federal Reserve’s favoured inflation measure. This came out on Wednesday, signalling caution within the market given the current economic climate.

According to statistics from the Bureau of Economic Analysis, consumer spending rose by 0.7% last month, after accounting for inflation. However, the PCE index remained flat compared to the previous month for the first time in nearly a year. This stability, especially in the core PCE, the category excluding food and energy, is the lowest it has been in five years.

On a somewhat positive note, core PCE inflation saw a rise to 3.5% in the first quarter, which is the highest in a year. Particularly, a measure of goods inflation minus food and energy also fell for the first time this year. Meanwhile, prices of core services, which exclude housing and energy, were nearly unchanged, marking their lowest level since 2020.

Despite this, the crypto market continues to struggle. Multiple cryptocurrencies are trading in the red, including Bitcoin, which briefly surged above $95,000 but has since reversed course. This bad economic data, which didn’t align with forecasts, prompted a risk-off sentiment across the markets, leading to about $370 million in liquidations in the crypto sector as investors reevaluate their strategies regarding riskier assets.

This situation mirrors broader losses across U.S. stock markets, with the Nasdaq dropping by 2% and the S&P 500 slipping by 1.5%. Bitcoin (BTC) has also dropped approximately 2%, landing at around $94,300. Ethereum (ETH) has seen a more drastic decline of 3.73%, with many cryptocurrencies, including Cardano (ADA) and XRP, falling over 5%. Solana (SOL) isn’t far behind, with a nearly 4% decrease. The overall crypto market capitalisation has plummeted beneath $3 trillion, settling at $2.91 trillion.