The crypto market remained on edge on Friday after the U.S. released the Federal Reserve’s preferred inflation metric.
Bitcoin (BTC) price dropped below $85,000, while popular tokens like Shiba Inu (SHIB), Dogecoin (DOGE), and Cardano (ADA) fell by over 3%. The total market cap of all cryptocurrencies tracked by CMC dropped by 2.6% to $2.76 trillion.
A report from the Bureau of Economic Analysis showed that the core personal consumption expenditures (known as the PCE) index rose from 2.7% in January to 2.8% in February, exceeding the median estimate. On a monthly basis, the core PCE rose from 0.3% to 0.4%.
The headline PCE remained at 2.5% year-over-year and 0.3% month-over-month, signaling that inflation remains a persistent challenge in the U.S. economy, still above the Fed’s long-term target of 2.0%.
Fed actions could hit BTC, SHIB, DOGE, ADA, and altcoin prices
The PCE is a closely-watched inflation gauge because, unlike the consumer price index, it includes data from urban and rural areas.
Analysts expect both CPI and PCE to trend higher following Donald Trump’s tariff policies. He has already raised steel and aluminum tariffs by 25%, and this week added a 25% tariff on all imported vehicles.
While Trump has pledged to fight inflation, he reportedly acknowledged that his tariffs would have inflationary effects. According to the Wall Street Journal, he has privately urged automakers not to raise prices, though they have pushed back, citing higher operational costs due to tariffs.
Rising inflation could negatively impact Bitcoin and altcoins like SHIB, DOGE, and ADA. Higher inflation may force the Fed to hold interest rates higher for longer, as cutting rates too early could further fuel price pressures.
The other significant economic risk is where the economy crashes into a recession as Mark Zandi predicts. Such a move would lead to a higher unemployment rate and economic misery in the US.
On the flip side, a recession could help ease inflation, as consumer spending declines. That would likely push the Federal Reserve to cut rates and reintroduce quantitative easing. The U.S. government may also roll out a stimulus package to boost the economy.
Such monetary and fiscal responses would likely be bullish for Bitcoin and altcoins, as lower interest rates and fresh liquidity tend to benefit risk assets.
