Key Takeaways:
On Friday, Bitcoin’s value dropped suddenly to $65,000 as a wave of liquidations hit the crypto and equities markets following the hotter-than-expected US inflation numbers.
US Inflation Rises to 3.8%, Causing Crypto and Equities Market to Suffer Major Losses
The core consumer price index (CPI), which excludes the volatile food and energy costs, increased by 0.4% in March from the previous month. The year-over-year inflation rate remained unchanged at 3.8%, but with food and fuel prices included, the number stands at 3.5%, up 0.3% from February and accelerating for a third consecutive month.
The effect of the high inflation could be seen in the crypto and stock markets.
On April 12th, the price of Bitcoin (BTC) plummeted 5% from $68,341 to as low as $65,110 in less than an hour during the late New York trading session. This was a stark drop from its $71,000 peak earlier in the day.
Major altcoins also suffered steep declines on the back of the world’s largest and leading cryptocurrency experiencing heavy losses.
Ether (ETH), the second-largest cryptocurrency by market capitalization, followed in BTC’s trail, falling 8% from $3,553 at the start of the day to close the session at $3,226. Meanwhile, BNB and Solana (SOL) lost almost 14% of their value to trade at $593 and $153, respectively, before recouping some of those losses by the end of the day.
Other prominent altcoins like Cardano (ADA), Avalanche (AVAX), and Bitcoin Cash (BCH) also recorded heavy losses that ranged between 15% and 20%.
Over $800 Million in Leveraged Crypto Positions were Liquidated on April 12th
The cryptocurrency market incurred over $400 million in losses under 60 minutes yesterday. Futures market data show that Bicoin’s flash crash resulted in more than $417 million in crypto-leveraged positions being wiped out in an hour, with BTC and ETH longs accounting for a bigger part of that figure.
According to data from Coinglass, the most short and long liquidations occurred on cryptocurrency exchange Binance, totaling $171 million, with OKX coming in second with combined losses of $158 million.
The market downturn triggered one of the largest leverage washouts of the month, with liquidations in the past 24 hours hitting $850 million among 270,993 traders in leveraged derivatives positions. Coinglass data showed that out of these trades, approximately $770 million were long positions expecting prices to increase leading up to the Bitcoin halving, which is expected to take place between April 15th and 19th.
Investors Moving Towards Hard Assets as Geopolitical and Economic Tensions Rise
The traditional stock market also suffered major losses as investors feared an escalation of the conflict in the Middle East after US officials warned on Friday of tensions rising between Iran and Israel.
This led to investors moving towards safer assets like gold, the value of which soared to an all-time high of over $2,400, and oil, the prices of which increased by 1%. Meanwhile, the S&P 500 and Nasdaq 100 indexes dropped about 1.7%.
The previous day, Jamie Damon, the CEO of JPMorgan Chase, warned of the “persistent” inflation, geopolitical tensions, and the Federal Reserve’s quantitative tightening efforts as a threat to the otherwise positive outlook on the US economy.
During a first-quarter earnings call, the head of America’s largest bank by assets under management said the country has “never truly experienced” the full effect of the quantitative tightening on this scale, before adding that the market is likely to be weighed down by the inflationary pressures that are here to stay.
The current economic and geopolitical climate has dashed the markets’ hopes for an interest rate cut by the US Federal Reserve this year, amid fears that progress on controlling elevated price levels may be stalling.
At the time of writing, Bitcoin (BTC) is trading at $67,704 – down 4.7% in the last 24 hours.
