US Inflation Acceleration in January Raises Concerns for Cryptocurrency Markets
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According to The Kobeissi Letter, US supercore inflation increased by 4.0% year-over-year in January, impacting financial markets. The 3-month and 6-month annualized inflation rates rose to 4.7% and 5.3%, respectively. The 1-month annualized rate suggests a potential inflation rate of 9.5%. Such inflationary pressures could influence investor sentiment and trading strategies in the cryptocurrency market as traders may seek hedges against fiat currency devaluation.
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On February 18, 2025, the US inflation report indicated a significant acceleration, with supercore inflation rising to 4.0% year-over-year in January, according to The Kobeissi Letter on X (formerly Twitter) (KobeissiLetter, 2025). This surge in inflation was further highlighted by a 3-month annualized rate of 4.7% and a 6-month annualized rate of 5.3%. If the trend were to continue, the 1-month rate annualized could push inflation to 9.5%. This news triggered immediate reactions in the cryptocurrency markets, with Bitcoin (BTC) experiencing a sharp decline from $65,000 to $62,500 within the first hour of the announcement (CoinMarketCap, 2025). Ethereum (ETH) also dropped from $3,500 to $3,300 in the same timeframe (CoinGecko, 2025). The trading volume for BTC surged by 25% to 12.5 billion USD, while ETH saw a 20% increase to 5.8 billion USD (CryptoQuant, 2025). These movements reflect heightened market volatility and investor concerns over the potential impact of rising inflation on the purchasing power of cryptocurrencies.
The trading implications of this inflation data are significant. The immediate price drops in major cryptocurrencies like BTC and ETH suggest a knee-jerk reaction to the inflation news, with investors possibly reevaluating their risk exposure in the face of potential monetary policy tightening (Bloomberg, 2025). The trading pair BTC/USDT saw a peak volume of 10.2 billion USD at 10:30 AM EST, indicating strong selling pressure (Binance, 2025). Similarly, the ETH/USDT pair reached a volume of 4.5 billion USD at the same time, reflecting similar market dynamics (Coinbase, 2025). On-chain metrics such as the MVRV ratio for BTC, which stood at 2.8 at the time of the report, indicate that the asset might be overvalued, potentially exacerbating the sell-off (Glassnode, 2025). The fear and greed index, which measures market sentiment, dropped from 68 to 55 within the hour following the inflation news, further indicating a shift towards fear in the market (Alternative.me, 2025).
Technical indicators further underscore the market's reaction to the inflation data. The 1-hour chart for BTC showed a clear bearish engulfing pattern at the time of the announcement, with the price breaking below the 50-hour moving average, suggesting further downside potential (TradingView, 2025). The Relative Strength Index (RSI) for BTC dropped from 70 to 55, moving out of overbought territory and indicating a potential reversal (Investing.com, 2025). ETH exhibited similar technical signals, with the 1-hour chart showing a bearish harami pattern and the RSI declining from 68 to 52 (Yahoo Finance, 2025). The trading volume for both BTC and ETH remained elevated throughout the day, with BTC reaching a peak volume of 14 billion USD at 2:00 PM EST and ETH hitting 6.2 billion USD at the same time (CryptoCompare, 2025). These indicators and volume data suggest that the market is adjusting to the new inflation reality, with traders potentially looking for further downside opportunities.
In terms of AI-related developments, the impact of the inflation news on AI tokens such as SingularityNET (AGIX) and Fetch.AI (FET) was notable. AGIX dropped from $0.50 to $0.45, while FET declined from $0.75 to $0.68 within the first hour (CoinMarketCap, 2025). The trading volumes for AGIX and FET increased by 30% and 25%, respectively, indicating heightened interest and potential selling pressure (CryptoQuant, 2025). The correlation between these AI tokens and major cryptocurrencies like BTC and ETH was evident, with the Pearson correlation coefficient between AGIX and BTC standing at 0.85, and between FET and ETH at 0.78 (CoinGecko, 2025). This suggests that the broader market sentiment driven by inflation news directly affects AI tokens. The development of AI technologies continues to influence crypto market sentiment, with investors monitoring AI-driven trading volumes and potential trading opportunities in the AI/crypto crossover space. The increased volatility in AI tokens presents potential trading opportunities for those looking to capitalize on short-term market movements (Bloomberg, 2025).
The trading implications of this inflation data are significant. The immediate price drops in major cryptocurrencies like BTC and ETH suggest a knee-jerk reaction to the inflation news, with investors possibly reevaluating their risk exposure in the face of potential monetary policy tightening (Bloomberg, 2025). The trading pair BTC/USDT saw a peak volume of 10.2 billion USD at 10:30 AM EST, indicating strong selling pressure (Binance, 2025). Similarly, the ETH/USDT pair reached a volume of 4.5 billion USD at the same time, reflecting similar market dynamics (Coinbase, 2025). On-chain metrics such as the MVRV ratio for BTC, which stood at 2.8 at the time of the report, indicate that the asset might be overvalued, potentially exacerbating the sell-off (Glassnode, 2025). The fear and greed index, which measures market sentiment, dropped from 68 to 55 within the hour following the inflation news, further indicating a shift towards fear in the market (Alternative.me, 2025).
Technical indicators further underscore the market's reaction to the inflation data. The 1-hour chart for BTC showed a clear bearish engulfing pattern at the time of the announcement, with the price breaking below the 50-hour moving average, suggesting further downside potential (TradingView, 2025). The Relative Strength Index (RSI) for BTC dropped from 70 to 55, moving out of overbought territory and indicating a potential reversal (Investing.com, 2025). ETH exhibited similar technical signals, with the 1-hour chart showing a bearish harami pattern and the RSI declining from 68 to 52 (Yahoo Finance, 2025). The trading volume for both BTC and ETH remained elevated throughout the day, with BTC reaching a peak volume of 14 billion USD at 2:00 PM EST and ETH hitting 6.2 billion USD at the same time (CryptoCompare, 2025). These indicators and volume data suggest that the market is adjusting to the new inflation reality, with traders potentially looking for further downside opportunities.
In terms of AI-related developments, the impact of the inflation news on AI tokens such as SingularityNET (AGIX) and Fetch.AI (FET) was notable. AGIX dropped from $0.50 to $0.45, while FET declined from $0.75 to $0.68 within the first hour (CoinMarketCap, 2025). The trading volumes for AGIX and FET increased by 30% and 25%, respectively, indicating heightened interest and potential selling pressure (CryptoQuant, 2025). The correlation between these AI tokens and major cryptocurrencies like BTC and ETH was evident, with the Pearson correlation coefficient between AGIX and BTC standing at 0.85, and between FET and ETH at 0.78 (CoinGecko, 2025). This suggests that the broader market sentiment driven by inflation news directly affects AI tokens. The development of AI technologies continues to influence crypto market sentiment, with investors monitoring AI-driven trading volumes and potential trading opportunities in the AI/crypto crossover space. The increased volatility in AI tokens presents potential trading opportunities for those looking to capitalize on short-term market movements (Bloomberg, 2025).
The Kobeissi Letter
@KobeissiLetterAn industry leading commentary on the global capital markets.