Bitcoin (BTC) recovered from a nearly 5% drop on Thursday after the January U.S. inflation report showed a 7.5% increase in prices, a four-decade high.

The increase in inflation was the fastest since February 1982 and exceeded economists' predictions of a 7.3% rise. The U.S. Federal Reserve is expected to raise interest rates next month, which could ease inflation over time. Tighter monetary policy could also weigh on speculative markets such as equities and cryptocurrencies.

Stocks also fell on Thursday, with the S&P 500 down as much as 2% over the past 24 hours, while Treasury yields rose above 2%.

In crypto markets, bitcoin outperformed most alternative cryptocurrencies (altcoins). Typically, during down markets, investors overweight bitcoin because of its lower risk profile relative to altcoins. BTC was roughly flat over the past 24 hours, versus a 4% drop in ETH and a 6% drop in SOL.

Some analysts expect selling pressure to eventually wane, while others expect slowing economic growth and tighter monetary policy will keep buyers on the sidelines.

"The simple explanation from our end is that there is major trading volume around economic data releases," Sean Farrell, head of digital asset strategy at Fundstrat Global Advisors, wrote in a Thursday brief. "It’s possible that the carnage we witnessed the past several weeks already priced in a 50 basis point rate hike."

Fundstrat remains bullish on crypto, and it has advised clients to buy on dips through the first half of this year despite choppy price action and macroeconomic uncertainty.

Meanwhile, MRB Partners, an investment strategy firm, wrote in a note this week that stocks and bonds "will struggle to digest the less accommodative shift in global monetary policy over the next six to 12 months."

"There is further upside for government bond yields in the next year, although a pause likely looms in the near term," MRB wrote.

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Digital assets in the CoinDesk 20 ended the day lower.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.