Cryptocurrencies and stock markets are feeling the pain after the September 13 inflation report published an unexpected figure that showed headline inflation posting a 0.1% monthly increase.
Even with gasoline prices falling to multi-month lows and the housing market cooling, core inflation saw a 0.6% monthly increase and year-on-year inflation stands at 8.3%.
This chart from @TheTerminal shows why this #CPI number is so disappointing. The contribution of energy has declined, as expected; but services inflation is now rising sharply. Not what the #FOMC will have wanted to see. pic.twitter.com/BsfwFsuyD5
— John Authers (@johnauthers) September 13, 2022
Although market participants and investors had estimated that the next Federal Reserve rate hike would be 0.75 basis points, many also adhered to the assumption that today’s ICP report would be better than expected.
Since the market had reportedly “priced in” a 0.75 basis point rise, crypto traders were expecting Bitcoin, Ethereum and some altcoins to rebound higher.
Well, the result was quite the opposite.
Perma-bull Fed pivot CPI traders REKT. LOL
— Big Smokey (@big_smokey1) September 13, 2022
The Dow was down 2.6%, while the S&P 500 and Nasdaq fell 2.9% and 3.6% respectively. Naturally, risk assets also fell as Bitcoin price gave back more than 50% of its recent weekend gains with a 9% retracement to $20,350. Just one day after the merger, the price of Ethereum also fell 7.29% to $1,590, with most top-100 cryptocurrencies seeing single- to double-digit losses today.
While Bitcoin’s weekend rally from September 9 extended into the start of this week with the price reaching as high as $22,800, previous analysis warned that BTC was also trading near key overhead resistance.
As seen below, the multi-month resistance from BTC’s all-time high held as the price crashed to $22,400 as the market opened and monthly ICP data hit the media. The analysis also highlighted the “rolling bear flag continuation” trend that has been in play since Bitcoin price peaked at $69,000 on Nov. 10, 2021.
Unless Ethereum’s The Merge event is an extremely bullish catalyst, the most likely direction for Bitcoin remains down.
One bright spot to note is that despite today’s correction, Bitcoin price is still trading in its 90-day range (pink box) between $25,400 and $17,600. In my view, there is “nothing to see here” until the price breaks below $18,500 or the yearly low of $17,600.
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