Cryptocurrency prices took a sharp nosedive on Thursday, with bitcoin leading the way with a 4% decline. This drop came after a report of inflation pressures re-accelerating in September, causing initial market jitters. The situation worsened further when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against digital asset market maker Cumberland DRW.
Bitcoin, currently priced at $59,000, saw a significant decrease, returning to levels last seen after the unexpected interest rate cut by the U.S. Federal Reserve in mid-September. Altcoins also experienced losses, with the CoinDesk 20 Index dropping nearly 3% during the same period. Ether (ETH) fell by 3.5%, while Uniswap’s token (UNI) was the only one to show a positive return due to news about the platform’s layer-2 plans.
The day started off on a weak note following the U.S. Consumer Price Index report revealing a surprising re-acceleration of inflation in September. This news dashed hopes of another 50 basis point rate cut by the Fed in November, leading to concerns about a possible pause in the rate-cutting cycle at the upcoming meeting.
Market participants were further rattled by Atlanta Fed President Bostic’s hawkish comments hinting at a potential rate pause. This combination of factors triggered a sell-off, resulting in the liquidation of approximately $147 million in leveraged long positions across crypto derivatives markets, according to CoinGlass data.
The situation worsened in the afternoon as news broke about the SEC’s lawsuit against Cumberland DRW for allegedly trading crypto assets being sold as securities without proper registration. This legal action added to the existing regulatory challenges faced by U.S. crypto firms, following previous charges of market manipulation and skepticism from SEC Chair Gary Gensler regarding the future of cryptocurrency as a mainstream payment method.
In light of these developments, Quinn Thompson, founder of Lekker Capital, predicted that bitcoin would likely remain range-bound until the U.S. election in November due to the prevailing uncertainty and regulatory pressures in the market. Thompson emphasized the need for caution and vigilance amid the ongoing noise and volatility in the crypto space.
As the cryptocurrency market navigates through turbulent times, investors and traders are advised to stay informed and adapt to the changing regulatory landscape to mitigate risks and make informed decisions. The coming weeks leading up to the U.S. election are expected to bring further fluctuations and challenges, underscoring the importance of closely monitoring market developments and regulatory updates.