The U.S. consumer price index (CPI) report for September was released yesterday (13) night, and the increase was higher than market expectations. It originally hit U.S. stocks and the cryptocurrency market tumbled. Bitcoin once fell to $18,198, but then staged a “surprise reversal” , surged above $19,000 in frantic trading. At press time, Bitcoin was up 3.98% in the past 24 hours at around $19,812.
I am afraid that it is difficult for even analysts to explain the logic of this trend, because theoretically speaking, the CPI data is higher than expected, which usually increases the pressure on the US Federal Reserve (Fed) to tighten monetary policy, which will affect the stock market, cryptocurrency market, etc. It is bearish for risk assets.
However, with U.S. stocks and Bitcoin rebounding, investors in traditional markets said the negative news may have been priced in by traders.
Riyad Carey, a research analyst at crypto data firm Kaiko, also said: “The (CPI) numbers are very close to expectations, so the market has largely priced in in advance.”
Podcast “The Wolf Of All Streets” host and cryptocurrency analyst Scott Melker also emphasized that investors are clearly overreacting to the news when the CPI report is released. “The knee-jerk reaction to inflation data is often wrong, and we also saw a quick recovery in the market later on,” he said.
Data from CoinGlass, a cryptocurrency derivatives market monitoring tool, corroborates Scott Melker’s claims. Nearly 130,000 investors lost more than $360 million in futures contract liquidations in the past 24 hours. Over 83% of contract liquidations in the past 4 hours were from short traders.
Analysts from MICA Research, a cryptocurrency research team, also commented that because the U.S. stock market has already fallen in the past two weeks, the market has already been in a tragic situation last week. Yesterday’s CPI report came out, although the stock market was revised down quickly, but it also caused many shorts to cover the shorts. Profit-taking alone prompted a surge in U.S. stocks late in the session. He continued:
It can be seen that the strength of the previous waves of shorting is a typical bear market rebound, which also drives Bitcoin back to the support point of $19,000.
However, under the pressure of strong inflation, analysts pointed out that the probability of the Fed raising interest rates by three yards in November is very high. At present, interest rate futures bet 99% of interest rate hikes by three yards, and the remaining 1% shouted to four yards. The benchmark at the end of the year Interest rates will reach 4.5% to 4.75%, which is expected to be very surprising, and there is a high probability that the price of risky assets will be further revised down.
