Bitcoin and Ether fell Friday morning in Asia, curtailing a strong run up in the week, after the U.S. January Producer Price Index (PPI), a measure of wholesale inflation, rose much faster than expected to rekindle concerns the Federal Reserve will continue to crank up interest rates. U.S. equities fell overnight as did nine of the top 10 non-stablecoin cryptocurrencies. The exception was Polygon, which announced a new scaling solution for Ethereum.
- Bitcoin fell 2.82% in the last 24 hours to trade at US$23,621 as of 8 a.m. in Hong Kong, capping its gain over the last seven days to 8.26%, according to CoinMarketCap data. Ethereum lost 1.98% to US$1,640, though it is still up 6% in the past week.
- Polygon’s Matic was the only token to continue its weekly bull run, gaining 3.16% to US$1.37 for a weekly increase of 11.69%. On Wednesday, the layer-2 blockchain announced plans to launch a new mainnet called zkEVM that is expected to scale Ethereum faster with better privacy. Japan’s gaming giant Square Enix also announced Thursday that its first Web3 game will be launched on Polygon.
- Cardano led losses in the top 10 with a 7.19% drop to US$0.388. Solana fell 6.75% to US$22.27, though it remains 8.94% higher for the week.
- Cryptocurrencies largely followed the slide in U.S. equity markets after the January PPI rose 0.7% from December, the biggest gain in about eight months, and well above the 0.4% expected in economists’ forecasts. U.S. jobless claims for the week ended Feb. 11 came in lower than expected at 194,000, pointing to a strong labor market and another inflation signal.
- The inflation concerns come amid actions by regulators in the U.S. against cryptocurrency services. The U.S. Securities and Exchange Commission last week fined the Kraken exchange US$30 million and ordered it to stop its crypto staking services and the New York State Department of Financial Services ordered stablecoin issuer Paxos to stop minting the BUSD stablecoin. In response to the former, Cardano founder Charles Hoskinson said on Twitter that automated staking protocols offered on the Cardano blockchain will not be affected by the crackdown.
- The global cryptocurrency market capitalization dipped 1.1% to US$1.09 trillion. The total trading volume grew 27.87% to US$81.1 billion.
- U.S. equities lost ground Thursday. The tech-focused Nasdaq Composite Index dropped 1.78% and the S&P 500 Index fell 1.38%. The Dow Jones Industrial Average slid 1.26%.
- The U.S. Federal Reserve has been raising interest rates since March last year to get inflation back in its 2% target range. Inflation is currently running at more than 6%.
- Analysts at the CME Group predict a more than 90% chance that the Fed will raise rates by a further 25 basis points at its meeting next month. U.S. interest rates are currently at 4.5% to 4.75%, the highest in 15 years, and Fed officials have repeatedly indicated they could raise rates to as high as 5% to get inflation back to the central bank’s target range.
- “The incoming data have not changed my view that we will need to bring the fed funds rate above 5% and hold it there for some time,” Cleveland Fed President Loretta Mester said on Thursday, according to a report by Reuters.