Bitcoin (BTC) declined by 5.3% between Oct. 9 and Oct. 10, reaching a three-week low of $58,900. The market correction began after the United States reported higher-than-anticipated consumer inflation data, suggesting traders are concerned that the Federal Reserve has less incentive to continue cutting interest rates in the near future.
The reaction from Bitcoin price reflects investors’ view that there is an increased chance of a recession. The US Bureau of Labor Statistics reported a 0.2% increase in the Consumer Price Index (CPI) for September compared to the prior month, which triggered concerns of ‘stagflation’ among investors, according to Yahoo News. In this scenario, prices continue to rise despite economic stagnation, a situation that runs contrary to the central bank’s objectives of stimulating growth while controlling inflation.
Meanwhile, US jobless claims rose to a 14-month high, according to data released on Oct. 10. Initial filings for unemployment benefits unexpectedly increased, reaching a seasonally adjusted 258,000 by Oct. 5. Although part of the rise can be attributed to a labor strike at Boeing, the broader negative impact on the economy remains a significant concern for policymakers, as reported by CNBC.
While there’s no guarantee that Bitcoin’s price will be adversely affected if the US Federal Reserve is compelled to adopt a tighter monetary policy, investors fear that an overheated economy will cause a stock market correction. Consequently, traders’ morale is dampened, given the current high 88% price correlation between the S&P 500 and Bitcoin.
In this context, it’s natural to expect Bitcoin traders to become less optimistic about short-term prices, especially after two consecutive days of outflows from the US spot Bitcoin ETFs. According to data from Farside Investors, these instruments saw net outflows of $59 million between Oct. 8 and Oct. 9, reversing the trend from the prior two trading days.
Bitcoin’s bearish momentum accelerated after reports that market maker Cumberland DRW was sued by the US Securities and Exchange Commission for acting as an “unregistered dealer” in…
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