Crypto Markets Fall As Inflation Data Declines, Bitcoin Holds Firmly Above $60,500

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As the US dollar strengthens ahead of inflation, the prices of Bitcoin and Ether fall. Instead of prioritizing inflation control, the Fed may shift its focus to supporting the labor market.

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As investors await the upcoming US inflation report, data from CoinGecko indicates that the total value of the crypto market fell more than 3% to $2.2 trillion.

Bitcoin prices, however, held firm above the $60,500 level in the hours before the main event. At the time of writing by CoinGecko, Bitcoin experienced a volatile day, dipping below $62,000 before recovering to trade around $60,800.

Similar to Bitcoin, Ethereum has lost more than 2 percent in the past 24 hours, currently hovering around $2,400 with further declines in sight. Against volatile Bitcoin and Ethereum prices, the US dollar strengthened ahead of the September CPI report.

Bearish sentiment prevails in the crypto market, with Aptos (APT), Near Protocol (NEAR), dogwifhat (WIF) and Optimism (OP) among the heaviest assets in the last 24 hours. APT was down 9.5%, while NEAR, WIF and OP were down 6% each.

The upcoming CPI data shows an increase of 2.3% year-on-year, down from 2.5% in August 2024. Energy prices are expected to increase by 0.2%.

Deviations from the expected inflation report can cause market volatility and affect the Fed's rate decisions. If the report shows that inflation has risen more than expected, it could raise concerns about the need for the Fed to adjust interest rates, thereby increasing volatility in financial markets.

While the Fed's monetary policy is influenced by inflation data, its recent decision to cut interest rates by 50 basis points reflects a response to worsening job conditions rather than focusing solely on inflation.

Analysts say the Fed is concerned about the softness of the labor market as job opportunities shrink and unemployment slowly rises.

Analysts believe the Fed's shift from focusing primarily on inflation to the health of the labor market could reduce the impact of inflation on markets. However, some variability may arise from CPI reports.

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