Market Wrap: Bitcoins Price Plummets On Global Inflation Concerns
BTC sold off heavily on global inflation fears
Bitcoin (BTC) fell sharply on Friday and recently traded below $21,500, down more than 8% in the last 24 hours. The largest cryptocurrency by market capitalization fell by 13% in a week.
The decline began overnight, coinciding with unexpectedly strong inflation data from Germany. Annual producer inflation in Germany hit a record high of 37% in July against an expected 32%. Producer prices reflect the prices of goods and services sold by producers in the region. The German PPI data is similar to the US PPI data. For comparison, the PPI value in the US in July was 9.8%.
According to the CME FedWatch tool, after the announcement, the probability of a 75 basis point increase in the US Federal Reserve's federal funds rate rose to 44.5% from 41% a day earlier.
The price of Ether (ETH) also fell: 8% in a day and 13% in a week. Altcoins have plummeted lately, with SOL down 10% and AVAX and MATIC down 11% and 12%, respectively.
Sell-offs in traditional markets were lower, with the Dow Jones Industrial Average (DJIA) down 0.8% and the S&P 500 and Nasdaq Hi-Tech Composite down 2.1% and 1.3%, respectively.
Gold, considered a safe haven from inflation, fell 0.6%, while energy markets saw crude oil prices rise 0.32% and natural gas prices rise 1.1%. Copper futures rose 0.9%.
This article originally appeared in Market Wrap , CoinDesk's daily newsletter that covers what's happening in the crypto market today. Subscribe to receive it in your inbox daily .
Last price● Bitcoin (BTC): $21,257 −9.1%
● Ether (ETH): $1,690 - 9.8%
● S&P 500 close of the day: 4,228.48 -1.3%
● Gold: $1,761/troy ounce +0.3%.
● Daily close yield on 10-year Treasuries: 2.99% +0.1
Bitcoin, Ethereum, and Gold prices are taken around 4:00 PM PT. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk indices is available at coindesk.com/indices.
Technical captureThe overnight reaction to the inflation data sent the market into oversold territory.
Bitcoin fell sharply overnight, reacting poorly to unexpectedly disappointing German inflation data.
The hourly BTC chart shows a 4% decline since 06:00 UTC, around the same time that the German PPI data was released. The report reinforced market fears that the US Federal Reserve and other central banks are taking aggressive steps to curb inflation, which could have a negative impact on asset prices.
The hourly BTC chart below combines the hours of the German Producer Price Index announcement and the BTC price decline. The decline came with excessive volume at 06:00 UTC relative to BTC's 20-hour moving average. The decline also occurred in a price range with historically low volume. The Visible Volume Profile Range (VPVR) tool applied to the hourly BTC chart shows a set of "low volume nodes" from $22,000 to $21,000.
The VPVR tool measures activity levels in relation to specific price levels and can show where price contracts occur. Low volume nodes represent areas of low activity and often areas of high price volatility.
The BTC Hourly Relative Strength Index (RSI) fell to oversold levels after the price declined. RSI is a widely used technical indicator that measures price movement. A value of 70 or more means that the asset is overbought (i.e. overvalued), while a value of 30 or less means that the asset is oversold (i.e. undervalued). The current RSI of BTC is 29.23.
Focus on put options at $21,000.
The August 16 market review revealed open interest in BTC options. Given today's decline, expect the $21,000 option to move to 3,300 BTC (previously below 2,000 BTC). A put option is an option, but not an obligation, to sell an asset at a set price.
If the price of BTC falls below $21,000, traders holding $21,000 put options will be incentivized to exercise their right to sell BTC, further putting downward pressure on BTC.
Bitcoin's daily chart shows upside potential at $21,000.
There are no winners on CoinDesk 20 today.
The biggest harm
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This story originally appeared on CoinDesk.