[Bitcoin Now] Bitcoin Falls 6% Amid US Interest Rate Hike and Expected Sharp Rise in March CPI

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] The price of Bitcoin, the representative cryptocurrency, plummeted due to macroeconomic uncertainties such as the U.S. Federal Reserve's (Fed) indication of a base interest rate hike.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 8:20 a.m. on the 12th, the price of Bitcoin was $39,725 (approximately 49 million KRW), down 6.07% from the previous day. At the same time, the price aggregated by the domestic cryptocurrency exchange Upbit was 50.3 million KRW, down 4.77% (2.518 million KRW) from the previous day. This is the first time since the 16th of last month that Bitcoin has recorded a price in the $39,000 range.

Bitcoin prices are declining due to concerns over the Fed's interest rate hike and the upcoming release of the U.S. Consumer Price Index (CPI) on the same day. On the 6th of this month (local time), the Fed signaled a big step of raising the base interest rate by 0.5 percentage points at once. The March CPI is expected to surge 8.4% compared to the same period last year, exceeding the 7.9% recorded in February. Riyad Carey, a research analyst at Kaiko, a cryptocurrency data company, said, "Bitcoin and traditional markets are reacting negatively to predictions that the Fed will tighten monetary policy to combat inflation," adding, "It seems to be significantly affected by the CPI to be announced today." He further noted, "The prolonged Ukraine crisis and increased shutdowns in China are also impacting the market."

Additionally, Bitcoin prices declined due to the drop in the U.S. stock market. On the 11th, the Dow Jones Industrial Average on the New York Stock Exchange (NYSE) closed at 34,308.08, down 413.04 points (1.19%) from the previous session. The tech-heavy Nasdaq index fell 299.04 points (2.18%) to 13,411.96, and the large-cap S&P 500 index closed at 4,412.53, down 75.75 points (1.69%). CNBC, a U.S. economic media outlet, explained, "Bitcoin and the stock market should be independent, but their correlation has been high over the past few months."

Investor sentiment is also shrinking. The Digital Asset Fear & Greed Index operated by Dunamu, which runs Upbit, recorded 43.61, indicating a 'neutral' stage. This is a drop of 7.11 compared to 50.71 (neutral) the previous day. Dunamu's Digital Asset Fear & Greed Index is divided into stages of 'Extreme Fear (0?20)', 'Fear (20?40)', 'Neutral (40?60)', 'Greed (60?80)', and 'Extreme Greed (80?100)'. The greed direction indicates increased interest in buying among market participants, whereas moving toward fear indicates a fear of asset decline, leading to market exits and a chain reaction of price drops.