Bitcoin and crypto market holds steady as trade war tensions wipe post-CPI rally
- US CPI for February dropped to 2.8%, below market expectations of 2.9%.
- Bitcoin rose above $84,000 from its recent declines following the release of the inflation data.
- However, plans of retaliatory tariffs from US trading partners weighed on the market, wiping out most of the post-CPI gains.
Bitcoin trades near $83,000 on Wednesday amid global trade war tensions between the US and international trading partners. The top digital asset and several top cryptocurrencies erased most of their gains from earlier in the day, which was sparked by a lower-than-expected US Consumer Price Index (CPI) data for February.
Crypto market remains neutral despite lower-than-expected February CPI
The United States monthly CPI data for February came in below expectations across all key metrics, according to the Bureau Labour of Statistics (BLS).
Headline CPI rose to 2.8%, falling short of market participants expectations of 2.9%. The Core CPI — which excludes food and energy prices — slowed to 3.1%, lower than estimates of 3.2% and January's 3.3%. On a monthly basis, both CPI data rose by 0.2%. This marks the first time since July that both headline and Core CPI were below market expectations.
The crypto market saw a brief uptick following the soft CPI data, with Bitcoin rising above $84,000 and several altcoins noting double-digit gains. The S&P 500 and the Nasdaq 100 also recorded slight gains.
Lower CPI data historically benefits the crypto and stock market, as it influences the Federal Reserve (Fed) to favor a low interest rate environment, which is good for risk assets.
However, Bitcoin and the S&P 500 quickly wiped off most of their gains from earlier in the day as weak investor sentiment appears to weigh on the market. This follows President Donald Trump's new tariff threats and pressures on international trading partners.
"The muted reaction in major equity indices shows market optimism is dampened by lingering risks such as tariff pressures and growth uncertainties," Mike Marshall, Head of Research at Amberdata, told FXStreet.
President Trump imposed new 25% levies on all steel and aluminum imports from Canada on Monday. In return, Canada issued retaliatory tariffs on $21 billion worth of US goods on Wednesday.
Trump also threatened to counter the European Union's new retaliatory tariffs, announced earlier on Wednesday.
The EU announced new tariffs on $28 billion worth of US goods in response to Trump's 25% levy on aluminum and steel imports into the United States. As a result, market sentiment is leaning towards a risk-off strategy.
Current market mentality:
— The Kobeissi Letter (@KobeissiLetter) March 12, 2025
1. CPI Inflation Lower Than Expected: Sell stocks, we are entering a recession.
2. CPI Inflation Higher Than Expected: Sell stocks, rate cuts are cancelled.
3. CPI Inflation As Expected: Sell stocks, inflation is not falling.
Sentiment is incredibly…
Considering the effect of the trade war on crypto, alongside growing correlations with the stock market, Bitcoin could resume its downtrend in the near term.
"There's growing speculation about a recession, which is fueling market volatility. Recent comments from POTUS acknowledging the risk have only added to the uncertainty," said Anastasija Plotnikova, CEO of Fideum, in a note to FXStreet.
"Crypto remains highly sensitive — while easing inflation supports risk appetite, any economic downturn or a sudden inflation spike from tariffs could shake up the current stabilization," she added.
The entire crypto market cap is down 2.2% at the time of writing.
Author
Michael Ebiekutan
FXStreet
With a deep passion for web3 technology, he's collaborated with industry-leading brands like Mara, ITAK, and FXStreet in delivering groundbreaking reports on web3's transformative potential across diverse sectors. In addi
