What is the reason behind the current decline in the crypto market? Bitcoin and alternative coins wipe out their recent profits.
The cryptocurrency market experienced increased volatility on Tuesday, with Bitcoin leading the way. After briefly reaching the $50,000 mark for the first time in over two years, Bitcoin’s price suddenly reversed and tested the support level at around $48,500.
Despite a partial recovery in the market following Tuesday’s losses, over $250 million was liquidated from the derivatives market, mostly affecting long traders. However, market intelligence platform Santiment predicts a bullish outlook for the crypto market, citing a significant increase in social volume discussions about Bitcoin, reaching $55k.
One of the main reasons for the drop in the crypto market was the release of the latest data on the Consumer Price Index (CPI) by the United States Bureau of Labor Statistics. The consumer price growth exceeded economists’ expectations, rising by 3.1 percent annually instead of the predicted 2.9 percent. This increase was driven by sectors where economists had anticipated a possible ease in inflation, such as shelter costs. Some economists argue that the actual inflation rate is higher than the official data.
As a result, the markets reacted to the perceived inability of the US Federal Reserve to control inflation effectively. This led to a retracement in the cryptocurrency market, as well as in the gold and stock markets, while the US dollar index (DXY) gained 1 percent against other major currencies. Economists anticipate that the Fed will implement its first rate cut from June 2024.
In addition to the inflation concerns, the crypto market experienced a rotation of cash as short-term traders took profits after Bitcoin’s price crossed the 0.618 weekly Fibonacci Retracement for the first time ahead of the halving event. Furthermore, high-impact news from the United States coincided with the spike in Bitcoin’s price to $50k, causing crypto traders to seek refuge in stablecoins to avoid forced liquidations.
Tags: Altcoins, Bitcoin, Price Analysis