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Bitcoin Plummets Under $27K After Post-CPI Rally Reversal

Bitcoin's price plunged below $27,000 amid liquidations and low liquidity concerns following an initial rally driven by positive U.S. inflation data.

Bitcoin logo
Bitcoin logo

Bitcoin (BTC) experienced a price drop below $27,000 on Wednesday midday, following a morning rally spurred by moderately positive U.S. inflation data. The BTC/USD trading pair on Coinbase reached a low of $26,800 before recovering slightly, with TradingView data showing the most prominent cryptocurrency trading at around $27,400, down 4% in the past hour and 1.8% in the past 24 hours.

Liquidations Affecting Price Movement

Coinglass data revealed that over $47 million in BTC long positions were liquidated in the past hour, compared to just over $5 million in BTC short position liquidations. Long squeezes like these often contribute to lower prices.

Concerns About Low Liquidity

Riyad Carey, a research analyst at crypto data firm Kaiko, highlighted ongoing concerns about low market liquidity. He noted that BTC's aggregated 2% market depth, a measure of liquidity conditions, has not recovered since the FTX crypto exchange's collapse in November, calling it "a symptom of illiquidity."

CPI Data and Market Reaction

The Consumer Price Index (CPI) report, published by the Bureau of Labor Statistics, revealed that annual inflation slowed to 4.9% in April, down from 5% in March and below the expected 5%. The CPI increased by 0.4% monthly, matching expectations and rising from 0.1% in March.

Ether and Overall Crypto Market Performance

Ether (ETH), the second-largest cryptocurrency, followed a similar pattern as Bitcoin, declining by 1% in the past 24 hours to trade at around $1,860. The CoinDesk Market Index (CMI), an overall crypto market performance indicator, also dropped by 1% over the past 24 hours.

Equity Market Impact on Crypto

Equities showed mixed performance on Wednesday midday, with the S&P 500 down 0.1% and the Nasdaq up 0.5%. The Dow Jones Industrial Average (DJIA) decreased by 0.6% for the day. Lucas Outumuro, head of research at blockchain analytics firm IntoTheBlock, suggested that the crypto sell-off could be partially driven by the drop in stocks, indicating a correlation.