Bitcoin retreated to approximately $61,000 on Tuesday, erasing gains from earlier in the week as market participants reduced their exposure ahead of a key U.S. inflation report. The leading cryptocurrency was trading around $61,700, down roughly 3% for the day, according to CoinDesk data.
The selloff comes as traders focus on the May Consumer Price Index (CPI) due Wednesday at 8:30 a.m. Eastern. Economists polled by FactSet expect a 4.2% year-over-year increase, with core CPI—excluding food and energy—projected at 2.9%. Inflation at these levels would remain well above the Federal Reserve's 2% target, keeping the possibility of further rate hikes on the table.
The cautious sentiment extended beyond bitcoin. Ether slipped to around $1,643, down 2.7%, while Solana dropped 3.9% to $64.81. Crypto-related stocks, including Strategy (MSTR) and Coinbase (COIN), also declined, tracking the broader Nasdaq as it gave back earlier gains.
According to a Reuters poll, about 70% of economists expect the Fed to hold its policy rate at 3.50%-3.75% through 2026. However, rate futures still price in at least one hike by year-end, reflecting persistent inflation concerns. The April CPI report showed a 3.8% annual rise, with energy prices surging 17.9% and gasoline up 28.4%, adding pressure on the central bank.
Charlie Morris, chief investment officer at ByteTree, warned that a "4-handle" inflation print—market jargon for inflation starting with 4—should not be ignored, noting historical correlations with stock market downturns. Tom Porcelli, chief economist at Wells Fargo, said it remains "very hard for the Fed to justify any action" at this point, while Philip Marey of Rabobank sees the risk of more persistent inflation and fewer rate cuts ahead.
Despite the bearish sentiment, some analysts see value. Jim Ferraioli, director of crypto research at Schwab, described bitcoin as "cheap" relative to other assets and cautioned that waiting for a clear catalyst could mean missing the move. James Butterfill of CoinShares reported that $5.8 billion has flowed out of digital asset investment products in recent weeks, the largest outflow in over a year, driven by sentiment rather than fundamentals.
Gold, another no-yield asset, has also struggled, trading near its lowest in nearly three months. Both bitcoin and gold have faced headwinds as traders shift away from rate-cut bets and price in possible hikes.
Market participants are also watching Washington for progress on the CLARITY Act, a crypto market-structure bill, though inflation data remains the immediate focus. A softer-than-expected CPI reading could ease rate hike fears, providing relief for bitcoin and gold, while a hotter print might push hike odds above 80%, according to BeInCrypto.
