Bitcoin Barely Budge but Cryptos are Still Reeling from Regulatory Pressure After CPI Data

A number of cryptocurrencies, including bitcoinBTCUSD +1.73% and other cryptocurrencies, moved higher on Tuesday, but they remained below recent levels as regulatory uncertainty weighed on prices. Despite the continued cooldown of U.S. inflation, cryptos barely flinched following the news.

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There has been a small rise in the price of Bitcoin over the past 24 hours to near $21,700, which is still below the zone around $23,000 that had been the largest trading range for the digital asset for weeks until a selloff last week caused the price to decline by less than 1%. Since the start of the year, Bitcoin prices have risen 40 percent from their lows, but these gains have now been pared after paring gains from a rally that had seen prices jump 40 percent from their lows.

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Regulatory uncertainty has emerged as the latest threat to cryptos, with the Securities and Exchange Commission focusing its attention on a number of crypto exchanges and companies across the industry as the latest development. A number of products and services in the digital asset ecosystem are under scrutiny and appear to be vulnerable, including staking, which is critical to the Ethereum blockchain, and stablecoins, which are pegged to the US dollar.

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“Cryptocurrencies are weakening as traders worry about the crippling effects the SEC wave will have on the cryptocurrency market with its crackdown on staking products and stablecoins,” said Edward Moya, an analyst with the broker Oanda. “The news flow for crypto has been rather bearish in recent weeks."

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There appears to be little progress being made by macro data that will affect the picture for traders, as they compete with the ongoing regulatory developments. Cryptos were expected to move on Tuesday as a result of the consumer-price index for January, which had been released on Tuesday. Despite a tough macro backdrop of high inflation and rising interest rates, Bitcoin barely flinched after the inflation print yesterday, flitting around like the Dow Jones Industrial Average and the S&P 500 despite the high inflation and rising interest rates. 

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The Federal Reserve has been under pressure as it fights against price increases that are the hottest in decades, and investors wanted to see inflation continue to trend downward, easing pressure off the central bank. As part of its efforts to tame inflation, which was the driving force behind market selloffs in 2022, the Fed aggressively tightened financial conditions over the past year. This was slightly above economists' expectations in a release that was a bit of a mixed bag, but still down from the 6.5% that had been expected in December as the Consumer Price Index rose 6.4% in January.

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Bitcoin remains above the $20,000 level. “Until we see how Wall Street reacts to the inflation data that was released on Tuesday, it might be difficult for buyers to emerge," said Oanda's Moya. There is a possibility that investor sentiment could shift more firmly as trading in New York gets underway at the beginning of Tuesday, as traders digest the data that has been released. 

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“It appears that Bitcoin is currently yo-yo-ing within a tight range after the data has been released, but there are no obvious catalysts to trigger a resurgence of $23,000 or for the price to sink back toward $20,000 just yet. The market will continue to function for the time being," said Michael Safai, managing partner of Dexterity Capital, a crypto fund. “The inflation data and the Federal Reserve meetings in the future might not have the same push-pull effect on crypto prices that they did in 2022, because regulation is fast becoming the larger influence on sentiment than inflation data or Fed meetings."

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Besides Bitcoin, EtherETHUSD +3.68%, the second-largest cryptocurrency, gained 2% to close above $1,500 as a result of the price rise. There were a lot of strong performances from smaller cryptos or altcoins, with Cardano and PolygonMATICUSD +5.81% both up 3% on the day. The Memecoins were a bit more muted than the other altcoins, with DogecoinDOGEUSD +1.41%  and Shiba InuSHIBUSD +1.54%  each up 1%. Despite a 9% drop on Monday, Binance Coin, the token issued by the crypto exchange Binance, which has been pressured by regulatory headwinds, was up less than 1% on Tuesday after falling as much as 9% on Monday.