Bitcoin’s value dropped 4% — to a low not seen since July 2 — after core inflation in September came in well above expectations.Other cryptocurrency followed.
Year-over-year inflation for last month was 8.2% for September, according to the government’s U.S.Consumer Index Price (CPI), higher than Wall Street’s consensus expectations for 8.1%.Excluding food and energy, the core inflation rose 6.6% from a year ago, marking the highest level since 1982.
The figures show that inflation is proving more difficult to tame despite multiple Federal Reserve interest rate hikes that have depressed stocks and cryptocurrency this year.
“The worse-than-expected inflation reading is anything but good for traders,” Michael Safai, a partner with crypto trading firm Dexterity Capital, told Yahoo Finance.”Now that we know the outlook is far less rosy than we might have hoped, volumes will pick up a bit as some directional traders look to sidestep further pains, while others pick up bargains.”
Bitcoin plunged to $18,195 shortly after the CPI release, according to crypto indexer, CF Benchmarks , and is now changing hands around $18,400, down 4% in the last 24 hours, according to Yahoo Finance charts.
When inflation has come in higher than consensus estimates this year, bitcoin has sold off an average of 4% in the 30 minutes following the economic release, according to Singaporean crypto fund QCP Capital.
Last month, the largest cryptocurrency fell as much as 5% in the hour following the August inflation report.In May, it tumbled as much as 7% after the April’s CPI print.
Since then, bitcoin has recovered and is now battling to maintain a $18,000 floor, which it has held since the beginning of July.
“$18,000 is now the magic number that’s been the key support level for most of the year,” Ben McMillan, founder and chief investment officer with hedge fund IDX, told Yahoo Finance.”As long as bitcoin holds that, I think it will be an encouraging sign going forward.”
Story continues Currently, most of the the asset manager’s allocation to cryptocurrencies has been sitting in cash since the beginning of September when McMillan’s team worried bitcoin could fall to $12,000 to $13,000 per coin as bitcoin mining firms came under pressure and needed to unload their coins.
Given the $18,000 support level, “it wouldn’t take a lot for us to start tiptoeing back into risk at these levels,” McMillan said.
In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed in front of the Bitcoin course’s graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France.
Bitcoin is an electronic money that saw an incredible increase in 2017, its price rising up to 20,000 euros, but currently its price has dropped around 5,000 euros.(Photo Illustration by Chesnot/Getty Images) Major stock indexes such as Nasdaq ( ^IXIC ) and S&P 500 ( ^GSPC ) fell by at least 1%.The 10-year Treasury yield ( ^TNX ) started back above 4%, before dropping slightly late Thursday morning.
Over the past month, the Nasdaq and S&P 500 have sold off by 15% and 12%, respectively.After having lost 56% in the second quarter, bitcoin fared slightly better, down -10% for the same period.
Ether ( ETH-USD ), the second largest cryptocurrency, is down 5.5% in the last 24 hours and is hanging above $1,200 per coin, while shares of Coinbase Global ( COIN ), the only publicly-listed crypto exchange, sold off 11% in Thursday morning after the release.
For cryptocurrencies, which have lost more than half of their value between April and July of this year, the picture won’t improve soon, Mike Novogratz, founder and CEO of major crypto investment manager Galaxy Digital, told Yahoo Finance earlier this week.
“There is a tremendous amount of fear in the markets right now,” Novogratz said.
As of Thursday morning, the total market capitalization of crypto assets measured by Coinmarketcap has tumbled below $900 billion, dropping 4% from $923 billion to $881 billion starting hours before the CPI release.
Year to date, bitcoin has lost more than 61% of its value, a figure that has maintained a steady range over the past two months but is about twice as worse as major stock indexes.
“Revenue is coming down in the industry, [trading] volumes are down, excitement is down,” Novogratz said, “and this [crypto] winter could last longer than people think.”
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David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets.Follow him on Twitter at @DsHollers
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