The cryptocurrency market is grappling with recovery following a significant drop last week. Bitcoin‘s (BTC) price is battling to maintain its position above $60,000 despite a strong recovery effort, with macroeconomic influences continuing to impact the market’s stability.
What Impact Did US Inflation Data Have?
The recently released Consumer Price Index (CPI) data from the US met market expectations, stirring initial movement in the markets. The data raised the likelihood of a rate cut, with the probability of a 25 basis point reduction climbing from 47.5% to 62.5% before the data release. However, the anticipated positive impact on the cryptocurrency market did not materialize as expected.
Despite the CPI data, the market faced increased selling pressure due to significant transactions involving Bitcoin and Ethereum. The transfer of 10,000 BTC to Coinbase Prime by the US and the release of 17,000 ETH by Jump Trading added to market anxiety, counteracting any potential market uplift.
Why Did Volatility Decrease After the Data Release?
Singapore-based QCP Capital observed a notable decrease in the volatility of Bitcoin and Ethereum following the CPI data release. The volatility levels dropped by around 10 points, with risk reversals for ETH and BTC falling to -8 and -6 points, respectively. This suggests that investors are bracing for further declines due to the increased selling pressure from new market supply.
Key Inferences for Investors
– The likelihood of a 25 basis point rate cut has increased, which may influence investor sentiment.
– Significant BTC and ETH transactions are contributing to heightened market anxiety.
– Decreased volatility coupled with increased selling pressure suggests a cautious market outlook.
Recent fluctuations in the cryptocurrency market underscore the cautious stance of investors. Transactions involving large quantities of BTC and ETH have introduced new selling pressures, leading to potential declines in cryptocurrency values. This dynamic illustrates a paradox where, despite reduced volatility, downside risks remain prevalent.
How Did Recent US Data Boost the Market?
In contrast to the earlier trend, Bitcoin and altcoins experienced a rise today following positive announcements regarding core retail sales and jobless claims data. Core retail sales exceeded expectations at 0.4%, and jobless claims were lower than anticipated at 227,000, alleviating some recession fears in the US. This data provided a much-needed boost to Bitcoin and altcoins, showcasing the market’s sensitivity to economic indicators.