What happened

Shares of several cryptocurrencies fell today after a key inflation report came in hotter than expected this morning.

Over 24 hours, the price of the world's largest cryptocurrency, Bitcoin (BTC 1.42%), and the second-largest cryptocurrency, Ethereum (ETH 2.93%), traded nearly 3% down at 10:17 a.m. ET today. The price of the meme token Dogecoin (DOGE 2.45%) traded more than 4% lower.

So what

This morning investors had anxiously been awaiting the latest reading of the Consumer Price Index (CPI), which tracks the prices of a basket of common consumer goods and services and is one metric the market uses to keep tabs on inflation. Economists had been expecting the CPI to grow 8.8% year over year in June, but the CPI came in 9.1% higher, renewing fears of rampant inflation.

Line with arrow heading downward.

Image source: Getty Images.

Gasoline led the index and was up 11.2% year over year as the broader energy category in June jumped 7.5%. Other big increases came from utilities and transportation. Within the shelter category, the rent index increased 0.8% from May, the largest monthly increase since 1986.

"The June CPI release was an ugly print, no getting around it," Cliff Hodge, chief investment officer at Cornerstone Financial, told Bloomberg. "The Fed has no choice but to follow through on a more aggressive path, which raises the probability of recession next year."

The Federal Reserve's rate-setting committee will likely opt to raise its benchmark overnight lending rate, the federal funds rate, by another 75 basis points (0.75%) at its meeting later this month. The Fed did a 0.75% hike at its meeting in June. More rate hikes make debt more expensive for consumers and could slow economic activity, which is why the chance of a recession grows as the Fed remains hawkish.

Cryptocurrencies have not fared well during the rising interest rate environment this year, with the price of Bitcoin down close to 60% this year. Rising interest rates boost the yields on safer assets like bonds, which make riskier assets like cryptocurrencies less appealing.

Investors have been pretty bearish on Bitcoin of late. In the latest Bloomberg MLIV Pulse survey, roughly 60% of the 950 investors polled said they think Bitcoin will trade at $10,000 before hitting $30,000.

Now what

Inflation is undoubtedly incredibly high, which has been a headwind for the likes of Bitcoin and other cryptocurrencies. If there is any good news to be taken it's that we know commodity prices have started to come down in July and there have been hints that the economy is starting to slow as well.

While Bitcoin could certainly be in for more pain ahead, I am still bullish on the token's long-term prospects. Bitcoin is gaining more acceptance in the mainstream financial system, and cryptocurrencies are gaining traction all over the world. This makes me think that the pioneer of blockchain technology and crypto is here to stay.

I also like Ethereum, which has seen its smart contract technology used in a variety of applications, such as for non-fungible tokens, digital identities, and decentralized finance.

I continue to have no interest in the meme token Dogecoin because I don't see anything unique about it from a technical standpoint or in terms of real-world use cases.