Bitcoin, Altcoins Plunge Despite Lower US Inflation

Bitcoin and altcoins experienced a significant drop in value, defying expectations of an upward trend. This decline comes despite recent positive developments in the broader economic landscape, including a decrease in US inflation. The Consumer Price Index (CPI) for March showed a year-over-year increase of 2.4%, falling short of the predicted 2.6%. This lower-than-expected inflation data initially boosted market optimism, leading to a surge in the prices of Bitcoin, Ethereum, and other cryptocurrencies. Bitcoin jumped 7.5% to reach $82,000, while Ethereum climbed to $1,600, and Solana experienced an 11% surge, reaching around $114. However, this optimism was short-lived as the cryptocurrency market faced a sudden downturn.

Despite news this week of inflation rates lower than expected, top cryptos failed to capitalize for longer periods, leaving many disappointed and causing a wave of liquidations. BTC dropped from over $70,000 last week to below $67,000 early this week. With the inflation report released on Wednesday, it sharply rose back to about $70,000, only to fall again. It hit concerning lows of around $65,100 in a single hour on Thursday, dropping 2% from $67,000, leaving many holders and traders worried as they expected it to hold its own after inflation data was announced.

However, the asset’s price drop from late last week triggered massive selling action, keeping BTC from witnessing an upward rally even with the favorable inflation news. Its seven-day performance indicates a drop of over 7%. The sudden drop on Thursday flushed out about $180 million in leveraged BTC trades within the twenty-four hours leading to that day’s 2% drop in BTC price. BTC also saw $870 million liquidated from leverage trades in the past seven days. Beyond BTC, top altcoins like SOL, AVAX, ADA, and others saw price drops between 10% and 20%. ETH went down to about $3,400.

At a macro level, speculative assets like cryptocurrencies are taking a hit after the government made announcements implying that interest rates will not drop in the coming months. Investors pull out of speculative assets and do not want to put money into them due to less favorable borrowing rates. The entire crypto market takes a hit when BTC drops in value. Presently, the dollar is doing extremely well as European countries go through political uncertainty, driving a ripple effect through its financial system and impacting the Euro. A strong dollar value makes it harder for BTC to rise and thus prevents altcoins from flourishing as well.

The recent decline in Bitcoin and altcoins can be attributed to several factors. Historically, corrections between 20% and 40% have indicated an upcoming stage of accumulation before prices continue to rise. However, the current drop has been more severe, with Bitcoin's value declining nearly 30% from its all-time high, including a 1.6% drop in the last 24 hours. This has led to a 3.9% decrease in the global cryptocurrency market cap. The drop in value has also affected other altcoins, with some experiencing significant declines despite recent gains.

The recent tariff delay had initially eased trade-related uncertainties, providing a temporary reprieve for global markets. However, the hard-line stance on trade, particularly with China, has continued to exert pressure on market sentiment. The Federal Reserve has been closely monitoring both inflation and the potential impact of these tariffs, carefully weighing the risks to the US economy. While inflation has shown signs of easing, it remains above the Fed’s 2% target, indicating that the battle against inflation is far from over.

The decline in inflation has bolstered optimism in the markets, with investors increasingly hopeful that a sustained decrease in inflation could eventually lead to a more dovish stance by the Federal Reserve, including potential interest rate cuts. This could further stimulate economic growth and boost asset prices. However, the recent drop in cryptocurrency values suggests that market participants are still cautious about the long-term impact of tariffs on inflation and the broader economic outlook.

The recent double-bottom breakout in Bitcoin and the surge in altcoins like XRP had initially indicated a potential shift in market sentiment. However, the current decline suggests that the market is still volatile and subject to sudden changes. The broader market also experienced positive momentum following the inflation news, but the Federal Reserve’s response remains uncertain and is being closely watched by market participants. The latest data suggests a potential shift in inflationary trends, even as trade tensions continue to exert a powerful influence on market sentiment.

In conclusion, the recent drop in Bitcoin and altcoins highlights the volatility and uncertainty in the cryptocurrency market. Despite positive developments in the broader economic landscape, the market remains subject to sudden changes and is closely tied to broader economic trends and policy decisions. Investors and market participants will need to closely monitor future developments and adjust their strategies accordingly.