Bitcoin and cryptos fall; the market fears a tougher Fed

After a hesitant start to the week, investors seem to have surrendered to something that seems increasingly likely: a further rise in interest rates in the United States. Macroeconomic data released throughout February tempered the mood with which risk assets began the year, although many experts were already announcing at the time that the rebound was not sustainable.

January's PCE inflation reading, the Federal Reserve's (Fed) favorite indicator, put the final nail in the coffin. The headline figure rose to 5.4% from 5.3% the previous month and core inflation rose to 4.7% from 4.6% the previous month. Right now, CME's FedWatch tool gives almost a 25% probability that the central bank will raise interest rates by 50 basis points when three weeks ago it was giving a 6% probability to this scenario.

"European and US markets traded in the green yesterday, but the news, apart from the Windsor Framework, was not necessarily bullish for central bankers. US core durable orders expanded more than expected, and pending home sales surged 8% thanks to softer mortgage rates on a broad-based decline in yields. The latter data remained consistent with the strong and the resilient US economy, calling for more rate hikes from the Federal Reserve (Fed) to slow inflation," explained Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Meanwhile, Craig Erlam, senior market analyst at Oanda, noted that Bitcoin continues to trade in the same range it has been trading in for the past few weeks. "Bitcoin is trading a little lower today after giving up the bulk of its Monday gains late in the session. We're still seeing strong resilience in cryptos but perhaps there's some profit-taking kicking in after what has been a remarkable start to the year. There remains considerable resistance around $24,500-$25,500, a break of which could be a very bullish signal," he noted.

There have been few movements in the rest of the market. There are notable declines of more than 2% for Polygon (MATIC) and Solana (SOL).