Downfall in crypto over poor CPI readings causes above $250 million in futures losses

Bitcoin and Ether fell below recent support levels in the past 24 hours – BTC fell about 9%, while ETH dropped 6% – which caused over $250 million in liquidations. The crypto market drop followed the decline in US stocks after higher-than-expected inflation readings for August.

According to data, futures tracking Bitcoin lost upwards of $130 million, edging above Ether futures with $125 million. Ethereum Classic (ETC) futures saw over $10 million in losses amid recent trading interest in the tokens.

As CoinDesk data shows, Bitcoin (BTC) fell some 9% in the past 24 hours, the most among major cryptocurrencies, while Ether (ETH) dropped 6%. Ether dropped to as low as $1,560 late Tuesday before recovering to as much as $1,622 on Sept. 14 early morning.

Meanwhile, XRP fell 8%, Solana (SOL) dropped 7%, Cardano (ADA) plunged 7.5%, further Cosmos (ATOM) dropped 11%, ApeCoin (APE) fell 12%, while Luna Classic (LUNC) dropped 14%.

Experts said the sudden drop on Sept. 13 night was caused by traders reacting to poor CPI readings. US inflation decelerated in August, but remained higher than what economists had expected, a sign that the US Federal Reserve will stay aggressive in raising interest rates. The consumer price index rose 8.3% in August from a year earlier, a mild slowdown from the 8.5% reported for July. Economists at FactSet had forecasted an 8.1% increase, and so the number was slightly higher than expectations. On a month-over-month basis, inflation rose 0.1% from July, when inflation remained unchanged.

As analytics firm Coinalyze noted on Twitter, data suggests part of the price volatility on Ether futures came as funding rates surged to yearly highs of nearly 0.15%.

Funding rates are periodic payments made by traders based on the difference between prices in the futures and spot markets. Depending on their open positions, traders will either pay or receive funding.

The payments ensure there are always participants on both sides of the trade. Participants utilize sophisticated strategies to collect funding rates while hedging losses due to token movements – which creates market dynamics that contribute to price volatility.

On the other hand, some market analysts said that Bitcoin was losing its appeal as a potential “inflation hedge” among investors.

“In countries where currency depreciation has been greatest, such as Japan, where the dollar to the yen has gained more than 20% since the beginning of the year, Bitcoin has lost 35% of its value,” shared currency trader of investment company Conotoxia, Daniel Kostecki, noted. “Against the Korean won, the dollar has appreciated 15% since the beginning of the year, while the BTC/KRW exchange rate has fallen more than 40% in that time.” 

Kostecki added that “even gold was not been able to counter current inflationary trends.”