With inflation data showing concern, financial markets are reeling on Thursday, with currencies bearing the brunt of investor uncertainty ahead of the release of the key consumer price index (CPI).
The U.S. Bureau of Labor Statistics is set to release its latest inflation figures at 8:30 a.m. ET, a report that could have a major impact on Federal Reserve policy and market sentiment.
Cryptocurrency markets saw a sharp decline, with Bitcoin (BTC), the leading digital asset, falling 2.5% to $60,700, erasing all of its gains from the previous week. Ethereum, the second largest by market capitalization, fell 2.3% to $2,375, clinging to a modest 1% weekly gain, according to CoinGecko data.
Alex Kuptsykevich, senior market analyst at FxPro, attributed the decline to macroeconomic factors. “A rising dollar has weakened crypto,” Kuptsykevich said in a note to Decrypt. “This dynamic is easily explained by the appreciation of the dollar and the increase in the attractiveness of bonds, which reduces the institutional attraction in Bitcoin.”
The total value of the cryptocurrency market fell 3.4 percent to $2.2 trillion in the previous day, compared to the S&P 500 index's recent all-time high. The difference in the market is further evidenced by the Crypto Fear & Gray Index, which retreated to the “fear” zone at 39, while the traditional equity market sentiment remains at 72 in the “greed” territory.
Right now, analysts are closely watching key support levels for Bitcoin.
CryptoQuant promoter Burak Kesmeci continues to play an important role in the average value of short-term bitcoin holders. “We can safely say that the close above $64,500 will give strength to the bulls,” he wrote. “However, Bitcoin investors' patience will be seriously tested if the 1-3 month holding average price is lost at $61,600.”
Adding to the pressure on the market earlier this week was news that the US Supreme Court refused to hear an appeal challenging the legality of the US government's planned sale of 69,000 seized bitcoins.
In a note shared with Decrypt, BRN analyst Valentin Fournier said that despite the potential selling pressure, the market seems to have already priced in this news, and Bitcoin may recover from its current dip.
“While these outflows are still relatively modest, they indicate that institutional support is waning as bullying fades,” he added.
Looking ahead to CPI data, economists expect a 0.1% increase in September, down from 0.2% in August.
The annual rate is expected to rise 2.3%, easing from August's 2.5%. Core CPI, which includes variable food and energy prices, is expected to rise 0.2% month-on-month and continue to rise 3.2% year-on-year.
Edited by Stacy Elliott.
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