Key Takeaways
- Bitcoin hit an intraday low of $72,787 after October’s CPI showed a 0.4% inflation increase.
- Coinglass reported over $632 million in crypto liquidations, including $511 million in long positions.
- Fed rate hike odds climbed to 85%, while Bitunix warned that persistent inflation could limit crypto gains.
Bitcoin Slides as Inflation Data Sparks Market Volatility
Bitcoin price fell below $73,000 on Tuesday following the release of October’s consumer price index (CPI) data, which showed a 0.4% monthly increase in inflation. According to Bitstamp data, the cryptocurrency plunged to an intraday low of $72,787 as the latest figures highlighted persistent inflationary pressures, including elevated energy costs that were a key concern during the recent U.S. midterm elections.
Before the CPI release, bitcoin had largely held above the $74,000 support level after retreating from nearly $75,500 on Monday. Although the cryptocurrency briefly reclaimed $75,000, its price gradually declined amid mounting concerns over a potential technology and artificial intelligence investment bubble, compounded by bearish sentiment following the U.S. election results.
Immediately before the sharp decline, bitcoin briefly rallied above $74,500 before a swift sell-off sent it tumbling to its daily low. At 11:25 a.m. ET, bitcoin’s price hovered above $73,200, down more than 2.3% over the last day.
Meanwhile, the volatility across bitcoin and the broader cryptocurrency market before and after the inflation report triggered hundreds of millions of dollars in leveraged position liquidations, with long traders bearing the brunt of the losses. Coinglass data shows that more than $169 million in leveraged bitcoin positions were liquidated over 24 hours, including nearly $150 million in long positions.
For the second consecutive day, bitcoin liquidations were eclipsed by those involving ether (ETH), which totaled just under $240 million. However, that figure represented a sharp decline from the more than $500 million recorded Monday. Overall, cryptocurrency liquidations exceeded $632 million over 24 hours, with long positions accounting for more than $511 million.
Persistent Inflation Raises December Fed Rate Hike Expectations
According to the U.S. Bureau of Labor Statistics (BLS), October’s 0.4% monthly CPI increase marked a modest slowdown from September’s 0.6% rise but still exceeded expectations. Energy prices, which have surged amid the war involving Iran, contributed less to monthly inflation than in September. The energy index rose 0.7% in October, compared with a 5.2% increase the previous month.
Some economists warn that the latest inflation figures suggest underlying price pressures remain more persistent than the Federal Reserve would prefer, raising the likelihood of another interest rate increase in December. Prediction market participants responded by pushing the implied probability of a 25-basis-point rate hike to 85%, up from 77% before the release. Interest rate traders give similar odds, according to CME FedWatch.
For bitcoin and the broader cryptocurrency market, any moderation in core inflation could temporarily improve risk appetite. However, analysts caution that persistent price pressures in key sectors could limit the scope of a sustained recovery.
“If services inflation and energy cost pass-through remain elevated, a persistently strong U.S. dollar and high Treasury yields would constrain any recovery in liquidity. Market reactions are therefore more likely to depend on the underlying CPI components than on the headline monthly inflation rate alone,” Bitunix analysts said in a note released shortly before the inflation report.
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