Bitcoin and Ethereum have just given up all fresh gains earned following this week's optimistic CPI report.
Bitcoin, the largest cryptocurrency by market capitalization dropped nearly 4% over the past 24 hours and is now hovering at just above $17,000, per CoinGecko. Bears have also regained control of Bitcoin on the weekly basis, with the cryptocurrency down 1.2% over the past seven days.
Ethereum, meanwhile, has plummeted nearly 6% in the past day, according to CoinGecko. It's still roughly $200 from falling into three-digit territory, trading at just over $1,200.
More than $117 million in levered positions across the entire market have been blown out, with Bitcoin and Ethereum making up the majority of those positions.
In the past 24 hours, ETH posted more than $45 million in liquidations, while BTC posted roughly $33 million. After that, Dogecoin ($3.3 million) and Litecoin ($3 million) were the next largest liquidations, according to liquidation data pulled from Coinglass.
More than 92% of all liquidations over the past 12 hours were blown out long positions.
The latest carnage comes fast on the heels of a Tuesday CPI report which suggested that hot inflation in the U.S. may be cooling.
Bitcoin, Ethereum reverse course after CPI report
On Tuesday, the U.S. Bureau of Labor Statistics indicated that inflation was indeed still rising per their measurements, but the pace at which it had risen was slower than the previous month. This suggests that the Federal Reserve's hawkish attempts to hamstring rampant inflation have had an effect.
The Consumer Price Index (CPI) measures the rate of change for the price of a basket of goods, including milk, used cars, and medical care. The rate rose in November by 0.1%, which is lower than how fast these prices were rising in October. At that time, the CPI report indicated that prices were rising by 0.3%.
Markets reacted swiftly, with stocks and cryptocurrencies both rising on hopes that the Fed's continued rate tightening would slow.
But with inflation year-over-year still over a whopping 7.1%, the Fed's job is not finished. A day after the report was released, the central bank signaled that it would continue to raise rates, but instead of the 0.75% hike, it walked this figure back to 0.5%.
As rates rise, money becomes more expensive to borrow, which can have ripple effects across the economy as the Fed attempts to slow spending. It also makes holding cash more enticing, as interest rates in commercial banks also rise, giving investors less risky returns than entering the stock market.
As such, equities and cryptocurrencies alike plummeted. And until inflation is brought back under 2%, as per the Fed's wishes, the ongoing crypto bear market shows little sign of returning to new highs.
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