Bitcoin And Ethereum Wick Down
The volatility has stuck the crypto market as the price of Bitcoin and Ethereum goes down. Bitcoin And Ethereum Wick Down The two largest cryptocurrencies react negatively and with volatility to the US Consumer Price Index (CPI), a metric used to measure inflation.
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At the time of writing, Bitcoin (BTC) is trading at $21,600 after declining north of $22,000 and losing 4% in the past 24 hours. Ethereum (ETH) is trading at $1,640 with a loss of 6% over the same period following an aggressive crash from a major resistance area near $1,8000.
Both cryptocurrencies made a sudden downward move before the CPI print. Bitcoin quickly dropped to around $21,300 while Ethereum crashed to $1,640, the current price action complementing those downward moves and hinting at a possible further downside for the cryptocurrencies.
CPI Prints Exceeds Expectations, What Does It Mean for Bitcoin?
US CPI pressure came in at 8.3% with core CPI rising to 6.3%, expectations for the former were 8.1%. In other words, the market expected inflation to be below current measures in hopes of easing monetary policy from the US Federal Reserve (Fed).
A low CPI combined with a slowdown in the economy may have given the financial institution room to relax about its rate hike. However, market participants are charging another 75 basis points (bps) increase for the upcoming Federal Open Market Committee (FOMC).
There is a small chance, according to recent market expectations, of a more aggressive response from the Fed with a 100 basis point rate hike. The financial institution’s current monetary policy has wreaked havoc on global markets and risk-bearing assets, such as Bitcoin.
A rise of 100 bps could push the price of BTC to its annual lows and beyond. Economist and crypto analyst Alex Krüger said the following about the CPI printout and its implication for the US Fed’s monetary policy:
Terrible core CPI numbers. The 0.3% MoM miss should delay any Fed turn by at least two months. Shorts should take it easy for a while, BTD can wait.
What could prevent further losses for Bitcoin and Ethereum?
The coming days will no doubt see more volatility as CPI pressures, market expectations of an aggressive Fed, combined with the impending Ethereum “Merge”. The event that will complete this network transition to Proof-of-Stake (PoS), “The Merge”, has generated a lot of hype in the crypto market.
Some of the market participants expect the Ethereum price to operate under a “buy the rumor, sell the news” event, others expect a resistance break around $2,000, and others expect the price to continue to fall from current levels. .
The latter has led to a spike in upside liquidity as traders continue to short ETH and get “squeezed out” by larger investors. This could give ETH the ammunition to reclaim the area around $1,700 as the market moves towards “The Merge”.