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The cryptocurrency market fell today, with the total market capitalization falling 3.70% to $2.59 trillion on April 9, and $250 million in liquidations in the cryptocurrency derivatives market.
The largest cryptocurrency, Ethereum, led the decline, falling 4.12% over the past 24 hours to around $68,941. Ethereum, the second-largest cryptocurrency, fell 4.63% over the same period to $3,508.
Let’s explore the reasons why the cryptocurrency market fell today.
Traders anxiously await US CPI data
Cryptocurrency prices have failed to maintain their recent bullish momentum ahead of the release of the Consumer Price Index (CPI) on April 10, which is expected to come in above expectations.
Commenting on the market reaction, CNBC analyst Sara Min said that U.S. inflation data due on April 10 could trigger major moves in risk assets as traders wait to see how the Federal Reserve will adjust interest rates.
Economists surveyed by Dow Jones expect the consumer price index (CPI) to rise 0.3% month-on-month and 3.4% year-on-year in March. The core CPI, which excludes food and energy prices, is expected to rise 0.3% and 3.7%, respectively.
Popular trader and analyst Daan Crypto Trades draws attention to macroeconomic events on April 10-11, including the Consumer Price Index (CPI), Producer Price Index (PPI), Initial Jobless Claims, and the ECB rate decision.
“Markets have not reacted much to these things recently, but I think it’s still important to keep an eye on them,” the analyst wrote.
A rise in CPI could mean a pullback, while a cooling CPI could trigger a rise, increasing the likelihood of a June rate cut by the Federal Reserve.
The CME FedWatch tool currently sees a 42.3% chance of keeping the federal funds rate unchanged in June, while the probability of a rate cut is 56.2%.
Futures liquidations drive crypto markets lower
The decline in the price of major cryptocurrencies has led to a large number of liquidations in the derivatives market. Bullish traders seem to have been caught off guard, resulting in long liquidations occurring rapidly.
Over $242.87 million in long positions have been liquidated across the cryptocurrency market in the past 24 hours, with $152 million of that wiped out in the past 12 hours.
When long derivatives positions are liquidated in the absence of volume buying pressure, asset prices are negatively impacted.
Over 83,164 traders were liquidated, with the largest single liquidation being in ETH/USD on OKX worth $7.53 million.
Related: Bitcoin Halving Won’t Bring 600% Returns This Year — So Adjust Your Strategy
The above chart shows that there are more liquidations in Ether than Bitcoin. Daan Crypto Trades highlighted this phenomenon in an April 9 post on X, saying: “Whenever ETH shows some strength, the entire market falls.”
Spot Bitcoin ETF outflows turn negative
The crypto market is facing a market cycle that is different from previous bull runs. This can be attributed to the launch of spot Bitcoin ETFs and the upcoming Bitcoin supply halving.
According to data provided by Farside Investors, on March 27, the net capital inflow of all spot Bitcoin ETFs turned negative at $233.8 million, of which Grayscale's converted GBTC fund recorded a total outflow of $303 million in one day, the highest in the past 10 days.
The slowdown in Bitcoin ETF inflows indicates a decline in investor risk appetite. In uncertain or bearish market conditions, investors may prefer to hold cash or invest in more traditional and less volatile assets.
However, with less than 10 days to go until the Bitcoin halving event, market participants remain optimistic about the upside potential of the crypto market.
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