Bitcoin quickly loses 4% as inflation doesn’t cool down as quickly as expected, leading to a sell-off in the crypto market.
Bitcoin (BTC) immediately fell below $22,000 on Sept. 13 after US inflation data fell short of estimates.
Hourly candlestick chart BTC/USD (Bitstamp). Source: Trade View
CPI pressure sparked a major crypto debacle
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD quickly falling around $1,000 after consumer price index (CPI) inflation hit 8.3% yoy in August.
The consensus is that the latter figure will come in at 8.1% and the excess suggests inflation is not slowing at the expected rate.
However, year-on-year growth still declined by 0.2% compared to July, keeping the broad trend of decelerating CPI inflation.
However, that wasn’t enough to avoid a crypto smash, and at the time of writing, Bitcoin is below $21,500, down 4% on the day.
Fed interest rate target probability chart. Source: CME Group
As market participants increased their bets on another 75 basis points and even 100 basis points of next week’s Fed rate hike, cold feet were becoming increasingly apparent ahead of Wall Street’s open.
“There is a lot of volatility and false positives in these events,” said Mikael van de Poppe, founder and CEO of trading company Eight.
“Remember this and avoid overdoing it. For now the lows are in and there appears to be some consolidation underway.”
Strength in the US Dollar Index (DXY), traditionally a headwind for cryptocurrencies, surged on CPI news, surpassing 109 for the first time since Sept. 9.
US Dollar Index (DXY) 1 hour candlestick chart. Source: Trade View
Ethereum weakens as merge hype dies down
As for altcoins, Ethereum (ETH)’s woes continued as existing weakness was exacerbated by Bitcoin’s fall.
Related: Bitcoin and altcoins are trending up, but upcoming macro events could cap the rally
Despite the pending merger, ETH/USD and ETH/BTC added to losses as the largest altcoin by market cap failed to capitalize on the surrounding hype.
“Even in CPI, this has always been a resistance area,” responded popular trader altcoin Sherpa.
“Heavy interactions at this level over the past year still call for caution.”
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every step of investing and trading involves risk, you should do your own research when making a decision.
