In a display of inflation data anxiety, financial markets are undergoing significant turbulence Thursday, with cryptocurrencies bearing the brunt of investor unease ahead of the crucial Consumer Price Index (CPI) release.
The U.S. Bureau of Labor Statistics is set to unveil the latest inflation figures at 8:30 AM Eastern Time, a report that could significantly influence Federal Reserve policy and market sentiment.
Cryptocurrency markets saw a sharp decline, with Bitcoin (BTC), the leading digital asset, plummeting 2.5% to $60,700, effectively erasing all its gains from the previous week. Ethereum, the second-largest cryptocurrency by market capitalization, also fell 2.3% to $2,375, clinging to a modest 1% weekly gain, according to data from CoinGecko.
Alex Kuptsikevich, senior market analyst at FxPro, attributed the downturn to macroeconomic factors. "The rising dollar spooked crypto," Kuptsikevich stated in a note to Decrypt. "This dynamic is easily explained by the appreciation of the dollar and the increased attractiveness of bonds, which reduces institutional traction in Bitcoin."
The cryptocurrency market's total valuation dropped 3.4% in the past day to $2.2 trillion, contrasting sharply with the S&P 500 index's recent all-time highs. The disparity in market sentiment is further evidenced by the Crypto Fear & Greed Index, which has retreated into the "fear" zone at 39, while the traditional equity market sentiment remains in "greed" territory at 72.
Now, analysts are closely watching key support levels for Bitcoin.
CryptoQuant contributor Burak Kesmeci said the average cost of short-term Bitcoin holders continues to play a critical role. “We can roughly say that a close above $64,500 would give the bulls strength,” he wrote. “However, if the average cost of the 1-3 month holders at $61,600 is lost, the patience of Bitcoin investors will be seriously tested.”
Adding to market pressures, news broke earlier this week that the U.S. Supreme Court declined to hear an appeal that would have called into question the legality of the U.S. government’s plans to sell 69,000 seized Bitcoin.
Valentin Fournier, analyst at BRN, said in a note shared with Decrypt that despite potential sell pressure, the market appears to have already priced in this news, and Bitcoin could rebound from the current dip.
"While these outflows are still relatively modest, they signal waning institutional support as bullish momentum fades,” he added.
Looking ahead to the CPI data, economists project a monthly increase of 0.1% in September, down from 0.2% in August.
The annual rate is expected to show a 2.3% rise, easing from August's 2.5%. Core CPI, which excludes volatile food and energy prices, is anticipated to rise 0.2% month-over-month and maintain a 3.2% annual increase.
Edited by Stacy Elliott.