Why is the crypto market down today?
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Loading... - Conor Murphy
- 14 Oct 2022
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Crypto prices are falling again on Oct. 13 after Bitcoin price dipped to a three-week low at $18,200, but what is behind the fresh wave of selling?
The most likely culprit on the day is a hotter-than-expected consumer price index (CPI) report that showed consumer prices rising by 0.4% in September. Compared to a year ago, consumer prices are now 8.2% higher, according to data from the Bureau of Labor Statistics.
The CPI report showed similar upticks in other categories, with the core CPI rising by 0.6% month-to-month since September and by 6.6% over the past 12 months, when food and energy prices are removed.
Meanwhile, nonfarm payrolls added 263,000 in September, and the unemployment rate dropped to 3.5%.
In brief, rising inflation is the absolute last thing the Federal Reserve wants to see. The Fed’s rate hikes are meant to cool off the economy and put a damper on high inflation, so the Oct. 13 higher-than-expected report is likely to translate into another round of 0.75-basis-point hikes in the upcoming months.
In response to the report, Bitcoin price shed nearly 5% and Ether dropped by 6% before both regained a majority of their losses in intraday trading. The fact that BTC and Ether are trading above their daily lows suggests that traders had anticipated an unfavorable CPI report and that the negative newsflow was already priced in.
Similar to BTC, the Dow and S&P 500 also nursed losses following the CPI report, but both indexes are set to close the day in the black with a 3% and 2.72% gain, respectively.
While the short-term reaction to the inflation report might inspire confidence from day traders, the general economic outlook remains bleak, and the high correlation between crypto and equities markets could translate for further downside for Bitcoin price if talk of higher interest rate hikes begins to dominate news headlines. Read More...
