Crypto markets experienced a broad pullback in the last 24 hours as investors anxiously await the January U.S. Consumer Price Index (CPI) report scheduled for release later today. The overall market dropped 3%, with Dogecoin taking the heaviest hit.

Bitcoin shed 1.3% of its value, while other major cryptocurrencies including Ethereum, Solana, Cardano, and XRP recorded losses up to 3%. Dogecoin suffered the most significant decline, plummeting 4.5%. Bucking the downward trend, BNB Chain’s native token BNB managed to gain 1% amid growing interest in its ecosystem.

Market analysts are closely watching the upcoming CPI data, which measures average price changes for consumer goods and services in urban areas. Economists expect the January report to show a monthly increase of 0.3% and a 12-month inflation rate of 2.9%. These figures will provide crucial insights into whether the Federal Reserve might implement interest rate cuts in 2025 to combat rising prices.

Some traders are positioning for a potential dollar decline if the CPI data suggests future rate cuts. Such a scenario could boost risk assets like cryptocurrencies, creating buying opportunities for investors anticipating price increases.

“We infer that the market is heavily long on the dollar. Given that negative news has likely been priced in, we believe USD now faces greater downside risk,” Singapore-based QCP Capital said in a Telegram broadcast on Wednesday.

“Any positive news could force USD longs to unwind their positions en masse, potentially sending risk assets higher. Tonight’s CPI release could be the catalyst that triggers a sharp move lower in DXY.”

However, QCP Capital also noted that not all cryptocurrencies might benefit equally from a dollar downturn: “Bitcoin continues to underperform equities and gold, suggesting some hesitation within the crypto community. Liquidity remains thin across the numerous new listings each week, and last week’s large-scale liquidation wiped out many traders,” referencing last Monday’s massive $1 billion liquidation event.

In the current uncertain environment, QCP recommended that purchasing “downside protection” — options that pay out as prices fall lower — remains the “best strategy” for traders.

As cryptocurrency investors and traders worldwide keep their eyes fixed on the CPI report, today’s data could potentially trigger significant market movements in either direction.