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A red-hot CPI of 8.2% plunges the crypto market deep into the negative

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(Kitco News) - Bitcoin (BTC) price dropped 3% amid a widespread downturn in the crypto on Thursday morning after a hotter-than-expected Consumer Price Index (CPI) reading of 8.2% put pressure on global financial markets.

In September, inflation in the U.S. was up 0.4% month over month, meaning both the yearly and monthly increase came in above expectations, all but assuring that the Federal Reserve will need to continue its aggressive rate hike agenda, markets be damned.

Data from TradingView shows that Bitcoin (BTC) price began trending down in the early trading hours on Thursday, and once support at $19,000 was lost, it rapidly fell to a daily low of $18,220 before bullish reinforcements arrived to bid it back above $18,900.

BTC/USD 4-hour chart. Source: TradingView

Bitcoin now finds itself trading at a four-week low, as noted by Kitco senior technical analyst Jim Wyckoff, who suggested that “It appears the keener risk aversion in the marketplace today is prompting selling pressure on Bitcoin.”

With no relief for rising inflation in sight and mounting global concerns putting pressure on financial markets worldwide, investors have few options available to help preserve their purchasing power, and it's likely to get worse before it gets better.

“Bulls are disappointed that Bitcoin has not been more attractive as a safe-haven asset the past several weeks,” Wyckoff said. “Bears have regained the near-term technical advantage now, to suggest more price pressure in the near term.”

Looking forward

The move lower by BTC following the CPI report wasn't entirely unexpected, as pointed out by QCP capital, “When CPI came in higher than expected, BTC has fallen an average of 4% in the 30 minutes following the release. This includes a 5% fall last month, and up to 7% like in Apr this year.”

Taking a glass-half-full approach, today’s print is the third consecutive monthly decline in U.S. inflation following a 40-year record high reading of 9.1% in June 2022. It remains to be seen if the long-term effects of the previous and planned rate hikes can meaningfully lower the CPI in the months ahead.

Traders now have their eyes fixed on the upcoming Federal Open Market Committee (FOMC) meeting scheduled for November 3, where it is highly expected that the Fed will do a fourth 75 basis point hike. JPMorgan's Marko Kolanovic expects a 75 basis point hike each from the Fed, ECB, and Bank of England going forward.

There is likely to be little relief for crypto traders until there is a meaningful reduction in inflation, as high inflation and slow economic growth are headwinds for risk assets like crypto and the broader financial markets.

As for now, regaining support at $19,000 would be a good first step for Bitcoin if it hopes to fulfill its promise as a safe-haven asset during times of strife.

Red Markets

The vast majority of tokens in the crypto market plunged deep into the red following the CPI report, as did assets in the traditional stock market.

Daily cryptocurrency market performance. Source: Coin360

As usual, there are a few exceptions in the market, including SingularityNET (AGIX), which put on a gain of 51.04%, a 49.36% increase for Mdex (MDX), and a 12.47% gain for Huobi Token (HT).

At the time of writing, the S&P, Dow and Nasdaq are looking to stage a comeback and have soared into the green, up 1.77%, 1.92%, and 1.51%, respectively.

The overall cryptocurrency market cap now stands at $888 billion, and Bitcoin’s dominance rate is 39.8%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.