Bitcoin Erases Earlier Losses After Inflation Reading

Bitcoin’s value rallied on Thursday after falling to a low not seen since July 2, minutes after the release of September’s inflation reading that beat expectations.

Bitcoin was changing hands at $19,407 on Thursday afternoon, up 1.35% in the last 24 hours. Shortly after the inflation release, bitcoin had plunged to $18,195, according to crypto indexer CF Benchmarks.

Year-over-year inflation last month was 8.2% in September, according to the US government’s Consumer Price Index (CPI), higher than Wall Street consensus expectations of 8.1%. Excluding food and energy, core inflation rose 6.6% from a year earlier, marking the highest level since 1982.

The data shows that inflation is proving more difficult to control despite multiple interest rate hikes from the Federal Reserve that have greatly depressed stocks and cryptocurrencies this year.

“A worse-than-expected inflation reading is anything but good for traders,” Michael Safai, a partner at crypto trading firm Dexterity Capital, told Yahoo Finance. But with the “less rosy outlook”, volumes increased and some directional traders struck bargains, he added.

When inflation topped consensus estimates this year, bitcoin sold by an average of 4% in the 30 minutes after the economic release, according to Singaporean crypto fund QCP Capital.

Although today’s move fell in line with the 30-minute moving average, it still leaves many market watchers stumped. While Bitcoin held onto its $18,000 floor, it continues to trade in a quiet range relative to stocks.

The Nasdaq (^IXIC) fell as much as 3.2% on Thursday, before closing 2.23% higher. The S&P 500 (^GSPC) lost as much as 2.4%, before closing 2.6% higher.

Over the past month, the Nasdaq and the S&P 500 have each sold off 13%. After losing 56% in the second quarter, bitcoin has fared slightly better, down 4% in the same period.

Ether (ETH-USD), the second largest cryptocurrency, is down marginally, shedding 0.26% on the day, trading at $1,294 per coin, while shares of Coinbase Global (CURRENCY) ended Thursday with a drop of almost 1%.

In this photo illustration, a visual representation of the digital cryptocurrency Bitcoin is seen in front of the Bitcoin course chart of cryptocurrency exchange website Bitfinex on November 20, 2018 in Paris, France. Bitcoin is an electronic money that experienced an incredible increase in 2017, rising in price to 20,000 euros, but currently its price has dropped to around 5,000 euros. (Photo illustration by Chesnot/Getty Images)

For cryptocurrencies, which have lost more than half their value between April and July of this year, the situation should not be expected to improve, Mike Novogratz, founder and CEO of major cryptocurrency investment manager Galaxy Digital, told Reuters. Yahoo Finance earlier this week. .

“There is an enormous amount of fear in the markets right now,” Novogratz said.

As of Thursday afternoon, the total market capitalization of crypto assets as measured by Coinmarketcap has rebounded from $923 billion to $881 billion again to $925 billion over the same 24-hour period.

“Revenues are going down in the industry, [trading] volumes are down, excitement is down,” Novogratz said, “and this [crypto] winter could last longer than people think, it could be shorter. It’s hard to predict.”

“This will probably look like more daily volatility until the market reaches a consensus, but the path remains the same,” Ben McMillan, founder and chief investment officer of hedge fund IDX, told Yahoo Finance.

McMillan added that the narrative around an earlier-than-expected Fed pivot in monetary policy may be gathering steam in light of the possibility that liquidity could “run dry” in US Treasury markets.

While that possibility may prove unlikely, he admitted: “I’m very curious about what tomorrow will look like.”

David Hollerith is a senior reporter for Yahoo Finance covering the stock and crypto markets. Follow him on Twitter at @DsHollers

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