Crypto Crash: Bitcoin Dips Below $60K Again
Zhitong Finance APP has learned that the unexpected rise in the U.S. inflation rate in September and the subsequent regulatory actions have dealt a double blow to the cryptocurrency market. The inflation rate increased by 0.2%, exceeding expectations, triggering market concerns that the Federal Reserve may pause interest rate cuts. The stance of Atlanta Fed Chairman Raphael Bostic further intensified market unease. In addition, the U.S. Securities and Exchange Commission (SEC)'s lawsuits against Crypto.com and Cumberland DRW, as well as crackdowns on market manipulation, have further increased market volatility. Bitcoin prices fell by about 4%, retreating to $59,000, while other cryptocurrencies also performed poorly. As of press time, Bitcoin has fallen by 1.27% over the past 24 hours, trading at $60,092.88 per coin.
Despite the obvious short-term bearish signals, some analysts remain optimistic about the long-term trend of Bitcoin, predicting that prices could reach $135,000 within a year. Market participants are looking forward to a trend reversal before the end of October, and a pullback that may break below $50,000 will also provide long-term investors with buying opportunities.
CPI rise hits interest rate cut expectations, cryptocurrencies fall in response
After the U.S. Department of Labor released higher-than-expected September Consumer Price Index (CPI) data, market expectations for the Federal Reserve to continue cutting interest rates in November were hit. Atlanta Fed Chairman Raphael Bostic said he would be willing to pause interest rate cuts at next month's meeting if economic data supports it. Bostic mentioned in an interview that the volatility of economic indicators means that the Federal Reserve should pause interest rate cuts in November to wait patiently and observe the development of the data.
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This rise in inflation data, coupled with an increase in weekly unemployment benefit claims, led to increased market volatility. Nevertheless, Bostic remains open to resuming interest rate cuts later this year, believing that the current economic situation is moving towards neutrality and that a 25 basis point rate cut will not have a significant impact.
However, the release of inflation data had an immediate impact on the cryptocurrency market. Bitcoin (BTC) fell by about 4% during U.S. afternoon trading, retreating to $59,000, the lowest level since the Federal Reserve unexpectedly cut interest rates by 50 basis points in mid-September. Other cryptocurrencies, such as altcoins, Ethereum (ETH), and the broad cryptocurrency benchmark CoinDesk 20 index also fell, with Ethereum down 3.5% and the CoinDesk 20 index down nearly 3%.
In response, Quinn Thompson, founder of hedge fund Lekker Capital, pointed out that due to the rise in CPI and oil prices caused by tensions in the Middle East, the market is worried that the Federal Reserve will not cut interest rates as significantly as previously expected. Atlanta Fed Chairman Bostic's tough talk about possibly pausing interest rate cuts could become a trigger for leveraged traders to stop losses. In fact, this market sell-off led to the liquidation of about $147 million in leveraged long positions.
SEC cryptocurrency regulation escalates, multiple companies accused
At the same time, the U.S. Securities and Exchange Commission (SEC) continues its regulatory actions against the cryptocurrency market. Crypto.com received a Wells notice from the SEC and filed a lawsuit to defend itself. The SEC intends to sue this digital asset exchange, accusing it of operating as an unregistered broker-dealer and securities clearing agency. Crypto.com CEO Kris Marszalek tweeted that the SEC's unauthorized overreach and illegal rule-making in the cryptocurrency space must stop.
In addition, the SEC also accused Cumberland DRW of being an unregistered trader of over $20 billion in cryptocurrency assets. This lawsuit once again raised concerns about the challenges of the regulatory environment for U.S. cryptocurrency companies. Cumberland countered by stating that they would not change their business operations or the assets providing liquidity due to this SEC action.The SEC's lawsuit is just one of the latest regulatory actions taken by the U.S. government against cryptocurrencies this week. On Wednesday, the Department of Justice indicted four market makers and over ten individuals on charges of market manipulation. SEC Chairman Gary Gensler is skeptical about the widespread use of Bitcoin or cryptocurrencies as a means of payment, referring to the cryptocurrency industry as rife with "scam artists" and claiming that its "leading figures" are either in prison or soon will be.
Thompson from Lekker added that there will be a lot of noise between now and the U.S. elections in November, and Bitcoin is likely to remain range-bound before then.
Is the Bitcoin price about to drop below $50,000?
The Bitcoin market is currently in a tumultuous period, with the potential for prices to fall below the significant psychological threshold of $50,000. Analysts attribute this potential decline to changing liquidity conditions and some unsettling technical signals.
Firstly, does the reduction in liquidity signal an impending market correction? Analyst Cole Garner expressed his concerns about the current market conditions on a social media platform. He warned that liquidity in the Bitcoin network is tightening, which could be a signal that investors are about to capitulate. Garner is particularly focused on the Liquid Vision Index, which measures the overall level of liquidity provided by central banks. Although the index may signal future buying opportunities, the market may experience a final drop before rebounding.
Another issue of concern is the reduction in the supply of stablecoins, especially Tether (USDT) and USD Coin (USDC). The decrease in supply could limit market purchasing power, thereby exerting downward pressure on Bitcoin prices.
However, despite these short-term bearish signals, Garner remains optimistic about Bitcoin's long-term prospects. He noted that the overall structure of the market remains bullish, and Bitcoin has recently been setting new highs in succession. Some market participants are expecting a reversal of the trend before the end of October, as traditionally this is a month when Bitcoin performs well. Additionally, external factors such as potential economic stimulus plans from China could trigger a new influx of capital into the cryptocurrency market.
Senior trader Peter Brandt further predicts that if Bitcoin can maintain key support levels, its price will reach $135,000 within a year.
Currently, Bitcoin is trading at around $60,000, and the market is nervously awaiting a possible price correction. A correction below $50,000 could present an attractive buying opportunity for long-term investors. In this uncertain context, conducting cautious and in-depth market analysis is more important than ever for all investors.