Why is the Crypto Market Down Today?
The cryptocurrency market experienced significant volatility on September 11, despite favorable macroeconomic data from the United States. The total market capitalization of cryptocurrencies fell by over 1.5% to approximately $1.97 trillion but quickly rebounded to $2 trillion.
Crypto Prices React to CPI Data
The instability in the crypto market mirrors the turbulence seen in U.S. stock markets. On September 11, the S&P 500 fell by 1.4%, the Dow Jones dropped 570 points (1.5%), and the Nasdaq Composite decreased by 1.35%. These indexes have since seen some recovery as the market digested the August Consumer Price Index (CPI) data.
Bitcoin (BTC) dropped 2% in the last 24 hours, trading at $55,713 before recovering to $57,010. Ether (ETH) initially fell 1.9% to $2,290 but is now trading 2.4% higher at $2,342. The instability follows the August CPI report, which showed inflation slowing as expected. Traders may have been poised for profit-taking after Bitcoin displayed strength ahead of the CPI data release.
“Markets are showing us that no rally is safe, but dip buyers are still looking for bargains,” said capital markets commentator the Kobeissi Letter on a social media platform.
Impact of CPI Data on Market Sentiment
The U.S. Bureau of Labor Statistics released data on September 11, showing that the CPI increased by 0.2% month over month and 2.5% year over year. The Core CPI, excluding volatile items like food and energy, rose by 0.3% in August 2024, slightly higher than the expected 0.2% increase and the 0.2% rise in July. The 12-month core inflation rate held steady at 3.2%.
Anticipation of Federal Reserve’s Decision
This CPI data release was the last major one before the much-anticipated Federal Open Market Committee (FOMC) meeting scheduled for September 18, where the Federal Reserve is expected to decide on interest rate cuts.
“Prediction market-implied odds of a 50 basis point interest rate cut dropped to 8% after August CPI inflation data,” observed the Kobeissi Letter. Futures markets have priced in an 83% chance that the Fed will approve a 25 basis point interest rate cut on September 18, according to the CME Group’s FedWatch tool.
“As we have been writing for months now, it is not the time for emergency rate cuts or 50 bps rate cuts. Rather, the Fed should steadily reduce rates 25 bps at a time,” added the Kobeissi Letter. “A meeting-by-meeting approach is needed.”
$160 Million in Liquidations
Sharp movements in the crypto futures markets contributed to the recent volatility. Data from Coinglass reveals that long traders—those betting on the market’s upside—experienced $108.25 million in liquidations in the last 24 hours. Short traders saw $54.12 million in liquidations during the same period. Bitcoin liquidations reached $13.17 million in the last 12 hours, with over $54.61 million worth of leveraged positions liquidated on the day. Long Ether liquidations totaled $34 million in the last 24 hours.
When long positions are liquidated, traders betting on rising prices are forced to sell at a loss, increasing selling pressure and driving market valuations lower.
Bear Flag Suggests Further Market Correction
After failing to breach the $2.242 trillion barrier on August 23, bulls retreated to the support level at $1.86 trillion. The total market value of all cryptocurrencies set a swing low at $1.814 trillion but has since recovered to $1.96 trillion.
Despite the recovery, a bear flag is visible on the daily chart, hinting at a continuation of the downtrend. The market is counting on support from the flag’s lower boundary at $1.917 trillion. A daily candlestick close below this level would signal a bearish breakout, projecting a decline to $1.552 trillion, representing a 21% drop from the current price.
Conclusion
The crypto market is currently experiencing heightened volatility due to several factors, including the recent CPI data, market sentiment regarding interest rates, and significant liquidations in the futures market. While there is potential for recovery, traders should remain cautious as the market digests these variables. Conducting thorough research
