Fed’s Key Inflation Gauge Surges, Crypto Market Reacts with Sharp Losses

The Federal Reserve’s preferred inflation gauge rose more than expected in February, sparking fresh concerns about interest rate policy and sending shockwaves through financial and crypto markets. The core Personal Consumption Expenditures (PCE) price index, which excludes food and energy, increased 0.4% from the previous month — its sharpest gain since January 2024 — pushing the annual rate to 2.8%. Economists surveyed by Dow Jones had anticipated lower figures of 0.3% monthly and 2.7% annually.

The PCE index measures price changes across a wide range of consumer spending and is a critical metric for the Fed's monetary policy decisions. Higher-than-expected inflation suggests the Fed may delay interest rate cuts, keeping borrowing costs elevated to curb inflationary pressure. This scenario typically reduces investor appetite for risk, impacting equities and especially cryptocurrencies.

Bitcoin (BTC) dropped 3.05% in the past 24 hours to $84,357, reacting swiftly to the inflation data as traders recalibrated their expectations for future Fed moves. Ethereum (ETH) slid 6.46% to $1,892, while XRP, Solana, and Dogecoin recorded losses of around 7%. Chainlink and Avalanche tumbled up to 9%, with Cardano and Stellar also declining over 5%.

The crypto downturn was compounded by a wave of liquidations in the derivatives market. Data from CoinGlass showed over $423 million in positions were wiped out in the last 24 hours, with over $367 million of those being leveraged long bets — traders who had expected prices to rise.

The hotter-than-expected inflation reading adds uncertainty to the Fed's path forward, raising the likelihood of prolonged high rates and tighter liquidity — a bearish setup for the crypto market.