On Tuesday, the crypto market experienced heightened volatility led by Bitcoin (BTC). After teasing $50,000 for the first time in more than 24 months, Bitcoin’s price experienced a sudden reversal to retest the support level at around $48,500.
Although the crypto market has since recovered some of the losses registered late Tuesday, more than $250 million was liquidated from the derivatives market, with the majority involving long traders. Nevertheless, the crypto market is more likely to continue in a bullish outlook, with the social volume discussion on Bitcoin hitting $55k on a notable rise, according to market intelligence platform Santiment.
Top Reasons Crypto Market Dropped
Higher than Projected CPI Data
On Tuesday, the United States Bureau of Labor Statistics released the latest data on the Consumer Price Index (CPI). Unexpectedly, the consumer price growth re-accelerated higher than economists had anticipated, whereby it climbed 3.1 percent on an annual basis while analysts expected 2.9 percent. The increase was fueled by key sectors that economists had issued a forecast of possible ease including shelter cost, whereby some economists opine that the inflation is higher than the official data.
As a result, the markets reacted to the fact that the US Fed was not able to control inflation high enough. Notably, the crypto market joined the Gold and the stock market in retracing while the US dollar index (DXY) gained 1 percent against other major currencies. Nevertheless, economists anticipate the Fed will conduct its first rate cut from June 2024.
General Cash Rotation
As the crypto hype reacted to Bitcoin price crossing the 0.618 weekly Fibonacci Retracement for the first time before the halving event, short-term traders accelerated profit-taking on Tuesday. Additionally, the spike to $50k coincided with high-impact news from the United States, which led to crypto traders taking refuge in the stablecoins market to avoid forced liquidations.
