Price action across the cryptocurrency market remains tilted to the downside as investors and companies digest higher-than-expected inflation today and growing uncertainty over conflict events in the Middle East and Ukraine.
Market volatility has sparked a rush of liquidations and sent the total value of the cryptocurrency market (TVL) to lows not seen since March 2021.
High inflation affects risky assets
Producer price index for September (Producer price indexThe print showed that inflation was higher than expected, with an increase of 0.5%. After today’s PPI reading, the price of Bitcoin (BTC) fell to a two-week low.
Adding to the weak sentiment surrounding inflation, most major banks still expect the US to see a recession sometime in 2023.
According to the US bank’s analysis, further interest rate hikes are likely and investor sentiment remains low in the current economy:
“U.S. stocks performed mixed in the first days of October amid rising inflation and longer interest rate trends and ahead of third-quarter corporate earnings releases.”
Related: Beyond Cryptocurrencies: Zero-Knowledge Guides Show Possibility From Voting to Finance
The total value locked of DeFi falls to a multi-year low
The TVL metric is a popular way to examine the health and sentiment of a proof-of-stake (PoS) blockchain such as Ethereum (ETH) as well as measuring TVL via decentralized applications (DApps).
The TVL of the current cryptocurrency market at $36.8 billion is the lowest since February 7, 2021. The TVL across the cryptocurrency market is currently dominated by Lido (LDO) which has a ~38% control relatively speaking.
The decline in TVL is exacerbated by lower trading volumes, which also fell by 15%.
Futures liquidations lead to a decline in the cryptocurrency market
When long derivatives positions are liquidated without buying pressure from trading volume or large amounts of TVL, cryptocurrency market prices are negatively affected.
In the past 24 hours alone, approximately $50.3 million worth of long positions have been liquidated across the cryptocurrency market. The largest liquidation was a Bitcoin purchase on the OKX exchange, worth $1.5 million.
Some analysts believe the macro economy is still strong enough at the moment to be a long-term buying opportunity for Bitcoin and other risky assets.
Related: Bitcoin ‘Death Cross’ Sees Bitcoin Price Drop $1,000, Erases ‘Uptober’ Gains
In the short term, the cryptocurrency market will continue to face multi-faceted challenges, and the ebb and flow of various economic factors will undoubtedly shape its course for the foreseeable future.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.