Bitcoin, Ethereum Plummet as U.S. Inflation Surges

Bitcoin and Ethereum prices dropped on Wednesday as the U.S. reported a higher-than-expected inflation rate for January. The Consumer Price Index (CPI) rose 3% in the 12 months through January, according to the Bureau of Labor Statistics (BLS), surpassing economists' expectations of a 2.9% annual increase.

The CPI, which tracks price changes across a broad range of goods and services, showed an acceleration in inflation after running hotter over the previous three months. In September, annual inflation had cooled to 2.4%.

The Bitcoin price fell to $94,250 following the CPI print, diving 2.3% in 15 minutes. Ethereum and Solana prices also dropped to $2,600 and $193, respectively, according to CoinGecko data.

Stripping out volatile food and energy prices, so-called core inflation ticked up to 3.3% in January after showing a 3.2% increase in the 12 months through December. This measure, used to gauge underlying inflation trends, came in slightly hotter than economists expected.

Bitcoin's price surged last year as the Federal Reserve's benchmark interest rate was lowered from a 23-year high to a target range of 4.25% to 4.50%. However, at their latest policy meeting, Fed officials decided not to cut rates, maintaining a relatively cautious stance.

During the Fed's December policy meeting, officials signaled that they are monitoring potential shifts in trade and immigration policy as a potential barrier to restoring 2% price stability. Fed Chair Jerome Powell, speaking before Congress for the first time since President Donald Trump's inauguration, was peppered with questions regarding Trump's trade war.

Powell maintained that the U.S. central bank is prepared to respond if inflation cools or the labor market weakens. However, the economy remains in solid shape, and the Fed does "not need to be in a hurry to adjust" interest rates, given last year's cuts.

Risk assets like stocks and crypto tend to thrive amid lower interest rates, which encourage borrowing and spending. However, they can also contribute to inflation. Market participants have grown doubtful that the Fed will cut rates very much at all in 2025, with traders penciling in a more