Risk-Off Is Back: Crypto, Equities Slide on Persistent Inflation

Derivatives markets show a 40% probability of rates eventually going greater than 5.5%, another possibility traders hadn’t considered at the beginning of February

article-image

Dall-e modified by Blockworks

share

The Federal Reserve’s preferred inflation gauge showed higher prices have been more persistent than originally thought, sending stocks and cryptocurrencies into the red Friday. 

The core personal consumption expenditures price index (PCE), which the central bank finds more comprehensive than the consumer price index, showed inflation rose 0.6% in January. 

Year over year, prices are up 4.7%, a far cry from the Fed’s 2% target, according to data from the US department of commerce. 

The S&P 500 and Nasdaq Composite indexes fell about 1.5% and 2% on the news. Bitcoin (BTC) and ether (ETH) trended downward as well, each shedding around 1%. 

Friday’s PCE reading paints a negative picture for markets, Tom Essaye, founder of Sevens Report Research, said, because it shows disinflation is slowing and inflation pressures are bouncing. 

“To be clear, [the report] won’t be enough to change the Fed’s thinking (this is very old data at this point) nor was it enough to move bonds or currencies,” Essaye added. “But for a market that’s concerned about stagflation, this report won’t do anything to ease those concerns.”

Thursday’s revised gross domestic product figures are also not helping to put investors at ease, Essaye said. The updated numbers showed US economic activity only grew modestly, which, coupled with increasing inflation, sets the stage for stagflation. 

Markets were less certain about a 25 basis point increase following Friday’s PCE report, which previously was the largely accepted consensus, data from CME Group shows. Futures markets are now pricing in about a 36% chance of a 50 basis point increase, a scenario markets thought was near impossible only earlier this month. 

Derivatives markets also show a 40% probability of rates eventually going greater than 5.5%, another possibility traders hadn’t considered at the beginning of February. The current target is between 4.5% and 4.75%. 

The Fed’s next policy-setting Federal Open Market Committee meeting is scheduled for March 15 and 16. A summary of economic projections will also be released following the meeting along with comments from Chair Jerome Powell.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 24 - 26, 2026

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template.png

Research

The march toward an interoperable and onchain-by-default internet depends on reliable messaging and value transfer across heterogeneous domains. Crosschain protocols now process >$1.3T in combined annual transfer volume and secure tens of millions of user interactions, yet no single design dominates.

article-image

DOJ files record civil forfeiture against more than 127,000 BTC linked to scam activity

by Blockworks /
article-image

Framework Ventures leads Crown’s $8.1 million seed round to fund BRLV, a fully backed Brazilian real stablecoin with institutional yield features.

by Blockworks /
article-image

Partnership deal centers USDC inside safe’s smart-account stack, tightening rails from onboarding to treasury and DeFi access

article-image

Partnership enables S&P’s stablecoin stability data to flow directly into DeFi systems via Chainlink

by Blockworks /
article-image

Industry executives weigh in on last week’s “stress test” and the importance of stablecoins

article-image

Eigen Labs’ J.T. Rose pitched verifiable off-chain compute with agentic AI coming to Ethereum