Cryptos plummet; Bitcoin loses $29,000 and Ethereum falls below $2,000
Surprise in the cryptocurrency market. Bitcoin (BTC) plummets about 4% in the last 24 hours and falls below $29,000. The drop is sharper in Ethereum (ETH): it falls more than 5%, loses $2,000 and shows signs of weakness for the first time after the completion of the Shanghai update.
Numerous analysts point towards the UK March inflation data as the turning point for cryptos. UK CPI fell to 10.1% in the third month of the year, but beat consensus expectations of around 9.8%. The underlying rate remained at 6.2% year-on-year, also above the 6% expected.
"One way or another, the hot U.K. CPI report that we got in today's European session made the market more vulnerable and may have been the piece of macroeconomic data that pushed that large seller to pull the trigger, which led to a cascade of sell orders as we dropped below $30,000," Matt Weller, global head of research at broker Forex.com, indicated in an interview given to 'CoinDesk TV'.
Meanwhile, Naeem Aslam, chief investment officer at Zaye Capital Markets, believes that the UK CPI reading for March reflects "sticky" and "incredibly stubborn" inflation, putting "more pressure" on the Bank of England (BOE).
"We think that there are strong chances that the BOE will increase interest rates once again, even though many thought that the bank was done raising rates. It is true that businesses in the UK are failing at the fastest pace in a long time, mainly due to higher inflation and not enough power with pricing margins. Consumers are already squeezed, and there is only so much price increase you can do because you begin to see empty tables and empty shops," the expert stressed.
Analysts are clear that this data, together with the strong wage growth reported on Tuesday, leave few options for the BOE, as it will be forced to raise rates by 25 basis points at its May 11 meeting, as it did at the March meeting, so that they end up at 4.5%.
According to Markus Levin, co-founder of XYO Network, "it looks as if all these macroeconomic concerns may finally be catching up with Bitcoin." "The U.K.’s higher-than-expected inflation numbers seem to be hitting a bit too close to home, both in the U.S. and in other countries where monetary policy is tightening and fears of a recession are growing," he explained.
In this regard, it should be noted that 12-month inflation expectations in the United States rebounded in April to 4.6%, one point above the level set in March. Raphael Bostic, president of the Atlanta Fed, favored a 25 basis point interest rate hike at the central bank's May meeting. Such a move would take interest rates up to the 475-500 basis point range, a scenario that the market seems to take for granted according to data from CME's FedWatch tool.
Also, in the crypto space, the words of Brian Armstrong, Coinbase's co-founder and CEO, about the possible exit of the company from the United States and its predisposition to a "long" legal confrontation against the SEC continue to resonate.
In other market news, there have been notable drops in most cryptoassets. Ripple (XRP), Polygon (MATIC) and Solana (SOL) fall between 5% and 7%. Cardano (ADA) retreats 3%.