AQN

Overnight, Bitcoin fell below 74k, reaching a low of 72.7k during the day, before rebounding slightly to above 73k.

The reason is the release of US inflation data overnight. On November 10, the US Bureau of Labor Statistics released the October CPI, with an overall monthly rate of 0.4%, compared to market expectations of 0.3%; the core CPI excluding food and energy had a monthly rate of 0.3%, remaining near 0.3% for the third consecutive month. Based on a three-month annualized conversion, core inflation was 3.75%, compared to 1.6% in July[1].

This report also has a special feature. Last October, the government shut down, interrupting data collection, and the Bureau of Labor Statistics did not release year-on-year changes this time. With only month-on-month figures remaining in the market and the year-on-year figure no longer used, the monthly figures are more likely to lead the market. The interest rate market reacted quickly. CME's FedWatch tool showed that the probability of keeping interest rates unchanged in December was 0%, the probability of a 25 basis point rate hike jumped to about 90%, and the probability of a 50 basis point rate hike jumped from 1% to about 10%. By January next year, the probability of a cumulative 50 basis point rate hike was 70% [2]. Officials also expressed hawkish views (on interest rate hikes). Fed Governor Waller said that if core CPI rose by 0.3% or more, a 50 basis point rate hike might be necessary, and he himself supported a 25 basis point rate hike in December. The Dallas Fed’s Logan put it more bluntly: at least two more increases, each of 25 basis points, followed by a pause for assessment.[3] Deutsche Bank revised its forecast to 25 basis points each in December, January and March, raising the target range for the federal funds rate to 4.50% to 4.75%, while also raising its long-term nominal neutral rate forecast to 3.75% to 4.00%.[4] The composition of this round of inflation is different from that of 2022. The Iran war has driven up energy prices, tariffs have increased the cost of goods, and investments in data centers and AI have pushed up labor costs for jobs such as electricians and plumbers. Some analysts believe that the oil price shock has already been transmitted into core inflation, and AI demand may also become a factor that the Fed needs to suppress.[5] There is also a structural problem here: raising interest rates suppresses demand, which is to pour cold water on the demand side and cool it down. However, most of the things that bring inflation are not on the demand side. The energy premium brought by war, the cost increase brought by tariffs, and the labor shortage brought by AI construction have limited effects on monetary policy. Using interest rate hikes to suppress inflation on the supply side will only be effective when demand cools down significantly. During this period, asset prices will be difficult to be beautiful. The price of coins has to endure this difficult period. On the 9th, the US Bitcoin spot ETF had a net outflow of $201 million and the Ethereum spot ETF had a net outflow of $185 million. The analysis cited by TheBlock takes 73k as the key support and sees 69k below it[6]. The 73k price level wasn't just randomly marked. On-chain data shows that the cost pressure zone for short-term holders is roughly between 73k and 76k. When the price falls into this range, those who bought in the last few months start to experience paper losses, and selling pressure tends to amplify here. Why? Because once there's a risk of incurring losses, short-term holders are more likely to consider cutting their losses and avoiding further risk. When interest rate hike expectations are at their peak, the market trades not high inflation, but high interest rates. This statement has a particularly profound impact on the cryptocurrency market, determining how much capital is willing to remain in highly volatile, high-risk assets. When inflation rises, the probability of interest rate hikes is at its peak, and the price of cryptocurrencies falls, the market will likely experience another period of panic. When the market starts to panic, you'd better have the capital to be greedy. This is what they mean by "opportunity always favors the prepared mind."