The latest U.S. Consumer Price Index (CPI) data had a significant impact on the crypto market. Bitcoin and Ethereum experienced increased volatility after the reports were released.
Market Reaction to CPI Data
When the CPI data was released, many expected it to lead to significant market changes, and the expectations were met, albeit not in the way many investors hoped. Inflation figures met expectations, which led to the higher chance of a 25 basis points rate cut from 47.5% to 62.5%. Right after the data release, cryptocurrencies and equities saw a brief spike that quickly dissipated. One factor contributing to this abrupt change was the U.S. government offloading 10,000 BTC to Coinbase Prime, and Jump selling 17,000 ETH. These actions exerted heavy pressure on the market.
Options Market and Bearish Trend Concerns
This situation has traders on edge for a good reason. The crypto market is already highly volatile and heavily leveraged, which means that any price movements are even more dangerous. The options market, often an indicator of future movements, is also pointing to potential hardships ahead. The swift sell-off of BTC and ETH has increased market tension, and traders are starting to prepare for possible extended downtrends. Analysts at QCP Capital noted that this reaction was expected, considering the significant sell-off by the U.S. government and Jump.
Situation with Crypto ETFs
Despite the overall negative momentum, there are some positive points. Yesterday, Bitcoin spot ETFs saw a net inflow of $11.11 million. This is particularly interesting given that during the same period, Grayscale Bitcoin Trust (GBTC) saw outflows of $25.03 million. This paradox shows how divided the market sentiment is. The outflows from GBTC aligned with the recent decision by the New York Stock Exchange's Arca electronic exchange to withdraw a proposed rule change that would have allowed trading of GBTC and other crypto ETFs. The ETF inflows slightly mitigate the overall bearish mood, but it's not enough to completely change the outlook. As for Ethereum, its market value remains 25% above its August low of $2,112, despite a recent gain of 13% over the past seven days.
The outcomes of the latest CPI data highlight just how fragile and sensitive the crypto market is. Traders, analysts, and investors continue to closely monitor the situation, trying to predict future movements.
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