Crypto Market In Freefall: Top Reasons Behind Today’s Dramatic Drop

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Crypto News: As the Federal Reserve’s preferred inflation index, the Personal Consumption Expenditures (PCE), revealed a stronger than expected increase in prices from the previous month —  both the cryptocurrency market and the U.S. stock market dropped significantly on Friday.

Fears Of Inflation Rise

The PCE price index, as revealed by the U.S. Bureau of Economic Analysis, showed that the rate of inflation in the country rose to 5.4% on an annual basis in January, up from 5.3% in December. This resulted in the core rate of PCE inflation increasing for the first time in four months, reaching 4.7%.

crypto news crypto marketThis figure is much greater than the 2% target that the Federal Reserve has established for inflation. The findings lend credence to the hypothesis that the Fed may have to keep interest rates higher for a longer period of time to suppress inflationary pressures. Both core PCE inflation and overall PCE inflation increased by 0.6% on a month-to-month basis.

Expiry Of Bitcoin Options

There are Bitcoin options contracts worth around $1.8 billion that are about to expire today, which may cause volatility in the short-term price movement of BTC. Open Interest, which is the total number of outstanding crypto derivative contracts that have not yet been resolved, has hit 300,000.

These Bitcoin contracts enable traders to prognosticate the price of BTC by allowing them to buy and sell options called “call” and “put” at a certain price at a given expiry date. The historical performances of these contracts are frequently utilized as predictors for short-term future price action through ratios.

Read More: Check Out The Top 10 DeFi Lending Platforms Of 2023

Market Reaction

The Dow Jones Industrial Average dropped by 472 points, which is equivalent to a 1.4% decline. In addition, the S&P 500 index and the Nasdaq composite both experienced a decline of 1.6% and 2.0% respectively. Companies with exposure to cryptocurrencies, like Coinbase (COIN), Microstrategy (MSTR), Robinhood (HOOD), and Riot Platforms (RIOT) saw a precipitous decline in their share values as well.

On the other hand, the total market capitalization of the crypto market fell by 3.27% from the previous day, bringing it down to $1.06 trillion at the time of writing. As things currently stand, the flagship digital asset Bitcoin (BTC) is trading at $23,190 while Ethereum’s (ETH) price reflects a decline of 0.81% over the last one hour and a drop of 3.40% over the course of past 24 hours. It’s presently exchanging hands at $1,595 at the time of publishing.

Also Read: Hedera Transactions Surge to Record High, Bullish HBAR Price Action Coming?

The post Crypto Market In Freefall: Top Reasons Behind Today’s Dramatic Drop appeared first on CoinGape.


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Pratik Bhuyan
CoinGape

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