What happened? Cryptocurrency plunges! Bitcoin once again falls below the $60,000 mark

According to the Zhitong Finance and Economics APP, the unexpected rise in the US inflation rate in September and the subsequent regulatory actions have dealt a double blow to the cryptocurrency market. The inflation rate rose by 0.2%, exceeding expectations, triggering concerns in the market about the possibility of the Federal Reserve pausing interest rate cuts. Comments from Raphael Bostic, President of the Atlanta Fed, have further exacerbated market anxiety. In addition, the US Securities and Exchange Commission (SEC) lawsuits against Crypto.com and Cumberland DRW, as well as crackdowns on market manipulation, have further increased market volatility. The price of Bitcoin fell by about 4%, dropping to $59,000, while other cryptocurrencies also performed poorly. As of the time of writing, Bitcoin has fallen by 1.27% in the past 24 hours, trading at $60,092.88 per coin.

Despite clear short-term bearish signals, some analysts remain optimistic about the long-term trend of Bitcoin, predicting that the price may reach $135,000 within a year. Market participants are expecting a trend reversal by the end of October, and a possible drop below $50,000 could provide buying opportunities for long-term investors.

CPI Rise Dampens Rate Cut Expectations, Cryptocurrencies Fall in Response

After the US Department of Labor announced a higher-than-expected Consumer Price Index (CPI) for September, market expectations for the Federal Reserve to continue cutting interest rates in November were dampened. Atlanta Fed President Raphael Bostic stated that if economic data supports it, he would be willing to pause rate cuts at the next meeting. Bostic mentioned in an interview that the volatility of economic indicators suggests that the Fed should pause rate cuts in November to patiently wait and observe data developments.

The rise in inflation data, coupled with an increase in weekly jobless claims, has led to increased market volatility. Nevertheless, Bostic remains open to resuming rate cuts later this year, believing that the current economic conditions are moving towards neutrality and a 25 basis point cut would not have a significant impact.

However, the release of inflation data had an immediate impact on the cryptocurrency market. Bitcoin (BTC) fell by about 4% during the US afternoon trading session, dropping to $59,000, the lowest level since the unexpected 50 basis point rate cut by the Fed in mid-September. Other cryptocurrencies, such as altcoins, Ethereum (ETH), and the widely used cryptocurrency benchmark CoinDesk 20 Index, also experienced declines, with Ethereum falling by 3.5% and the CoinDesk 20 Index dropping by nearly 3%.

In response, Quinn Thompson, founder of the hedge fund Lekker Capital, pointed out that due to the rise in CPI and oil prices caused by tensions in the Middle East, the market is concerned that the Fed may not cut rates as significantly as previously expected. Bostic's strong comments about the possibility of pausing rate cuts could serve as a trigger for leveraged traders to stop losses In fact, the market sell-off this time led to the liquidation of leveraged long positions worth about $147 million.

SEC Cryptocurrency Regulation Upgrade, Multiple Companies Accused

At the same time, the U.S. Securities and Exchange Commission (SEC) continues its regulatory actions in the cryptocurrency market. Crypto.com has received a Wells notice from the SEC and has filed a lawsuit to defend itself. The SEC intends to sue this digital asset exchange, accusing it of operating as an unregistered broker-dealer and securities clearing agency. Kris Marszalek, CEO of Crypto.com, stated on Twitter that the unauthorized overreach and illegal rule-making by the SEC in the cryptocurrency field must stop.

Furthermore, the SEC has also accused Cumberland DRW of being an unregistered trader of over $2 billion in crypto assets. This lawsuit has once again raised concerns about the regulatory challenges facing U.S. cryptocurrency companies. Cumberland has stated in response that they will not change their business operations or provide liquidity assets due to this action by the SEC.

The SEC's lawsuit is just one of the latest regulatory actions taken by the U.S. government against cryptocurrencies this week. On Wednesday, the Department of Justice charged four market makers and over a dozen individuals with market manipulation. SEC Chairman Gary Gensler is skeptical about Bitcoin or cryptocurrencies as a means of payment, calling the cryptocurrency industry "rife with fraud" and claiming that the industry's "leaders" are either in jail or will soon be.

Lekker's Thompson added that there will be a lot of noise between now and the November U.S. election, and Bitcoin is likely to remain range-bound before then.

Is Bitcoin Price About to Fall Below $50,000?

The Bitcoin market is currently in a period of turmoil, with the price potentially falling below the important psychological level of $50,000. Analysts attribute this potential decline to changing liquidity conditions and some concerning technical signals.

Firstly, does the decrease in liquidity signal an impending market adjustment? Analyst Cole Garner expressed his concerns about the current market conditions on social media platforms. He warned that liquidity in the Bitcoin network is tightening, which could be a signal that investors are about to capitulate. Garner is particularly focused on the Liquid Vision index, which measures the overall liquidity level provided by central banks. While this index may indicate future buying opportunities, there may be a final drop before a market rebound.

Another issue of concern is the decreasing supply of stablecoins, especially Tether (USDT) and USD Coin (USDC). The decrease in supply may limit the market's buying power, putting downward pressure on the price of Bitcoin.

However, despite these short-term bearish signals, Garner remains optimistic about the long-term prospects of Bitcoin. He points out that the overall market structure remains bullish, and Bitcoin has recently been hitting new highs. Some market participants expect to see a reversal in trends by the end of October, as historically this has been a good month for Bitcoin performance In addition, external factors such as the economic stimulus plan that China may introduce could trigger a new round of capital inflows into the cryptocurrency market.

Senior trader Peter Brandt further predicts that if Bitcoin can maintain a key support level, its price will reach $135,000 within a year.

Currently, the trading price of Bitcoin is around $60,000, and the market is anxiously awaiting a possible price correction. A correction below $50,000 could provide a attractive buying opportunity for long-term investors. In this uncertain environment, cautious and in-depth market analysis is more important for all investors than ever before