The cryptocurrency market experienced a notable downturn on Tuesday, with a 1.51% decline. This shift occurred in the wake of the Consumer Price Index (CPI) release for October. Bitcoin, which had been performing robustly, maintaining around the $37,000 mark, saw a significant drop of 4% to $35,000. This decline not only impacted Bitcoin but also reverberated across other cryptocurrencies.
Understanding the CPI Impact
The CPI, a key measure of inflation, plays a crucial role in currency valuation. As inflation rises, the purchasing power of a currency unit diminishes, requiring more units to buy the same goods. This inflationary pressure is closely monitored by central banks, which may adjust monetary policies in response, affecting financial markets, including cryptocurrencies.
Experts point out that the cryptocurrency market is particularly sensitive to CPI fluctuations—rapid changes in the CPI signal market instability, leading to increased pressure on cryptocurrencies.
The impact of the market’s downturn was starkly evident in Bitcoin’s performance. CoinGlass statistics revealed that nearly $307 million in leveraged cryptocurrency long positions were liquidated in a single day, marking the most significant liquidation since August 17. This liquidation occurred as Bitcoin’s price plummeted from over $28,000 to around $25,000 within minutes.
Ripple Effects on Other Cryptocurrencies
- Ethereum’s Slight Decline: Ethereum, which had been on a bullish trend, experienced a modest drop of 0.99% to $2033.7. Despite trading close to its middle range for the past five days, Ethereum’s price is still 8.49% above its five-day low and 4.73% below its five-day high. The current trading pattern suggests Ethereum is near its support level, with a significant gap before hitting resistance.
- Solana’s Average Volatility: Solana (SOL) witnessed a decrease of 3.05%, bringing its value to $55.3. Its volatility remains around the average compared to other cryptocurrencies.
- Avalanche’s Decline: Avalanche saw a decrease of 6.68%, trading at $16.96. Its 24-hour trading volume stood at $760.73 million.
- Cardano ADA’s Drop: Cardano ADA experienced a 3.50% drop to $0.3622. The 24-hour trading volume for ADA was reported at $421.06 million.
Conclusion
The cryptocurrency market’s recent downturn, triggered by the latest CPI data, underscores the sensitivity of digital currencies to macroeconomic indicators and central bank policies. While Bitcoin faced a significant drop, other major cryptocurrencies like Ethereum, Solana, Avalanche, and Cardano ADA also experienced declines, reflecting the widespread impact of economic factors on the crypto market.
