) a flurry of volatility on Wall Street at the open on October 12, when US economic data began to affect the markets.
Hourly candlestick chart BTC/USD (Bitstamp). Source: Trading View
Analyst: PPI volatility is the taste of the future
Data from Cointelegraph Markets Pro and TradingView showed that BTC/USD fell below $19,000 as the PPI turned out to be better than expected.
The hint that inflation is not falling as quickly as the Fed expected came after the release of the Producer Price Index an hour before the market opened, when local lows were recorded at $18,967.
The losses have disappeared as quickly as they appeared, and at the time of writing Bitcoin has already recovered above $19,000.
“Huge fluctuations in the value of the PPI. At least inflation is not accelerating,” wrote Mikael van de Poppe, co-founder and CEO of trading platform Eight, in response to the Twitter reaction.
But tomorrow, during CPI, volatility will be higher. Tonight during the FOMC Minutes as well.”
Van de Poppe advised traders to refrain from using leverage during upcoming macro events, as CPI in particular is likely to lead to some distinct false positives before and after the release.
However, Bitcoin’s trading range remained tight and there was no need for some market participants to take advantage of the relatively small moves in the market.
In a recent BTC/USD trading report on October 11, popular crypto trader Il Capo described the setup as “simple.”
“The price fluctuated between 19 thousand and 20500 for 3 weeks,” he concluded.
“If you accidentally flipped the range and lost money unnecessarily, it means that you are impatient. The basic scenario is exactly the same. First 21K, then new lows (14K-16K).”
The journey to new macroeconomic lows will create major problems for derivatives traders, who are participating in the largest ever buildup of open interest in bitcoin futures.
According to chain analysis resource Glassnode, the number is 660,000 BTC.
“Bitcoin futures open interest is at all-time highs and realized volatility is near an all-time low. A very good combination,” commented William Clementi, co-founder of analysis and trading firm Reflexivity Research.
Open interest chart for bitcoin futures. Source: glassnode
DXY levels are off but the yen is dropping
Meanwhile, after the opening, US stocks halted losses after an initial decline.
Related: BTC Price Still Not at ‘Maximum Pain’ – 5 Things to Know About Bitcoin This Week
The US Dollar Index (DXY) continued its last phase of consolidation, settling near 113.3 after it failed to rise to 113.5 for the day.
The DXY is still more than one point away from its 20-year highs and is not creating new headwinds for risky assets.
US Dollar Index (DXY) 1-hour candles chart. Source: Trading View
However, the dollar’s strength caused crises elsewhere as the Japanese yen returned to levels not seen since the 1990s.
Despite the central bank’s efforts to support the currency, the USD/JPY pair erased those gains in October and is now facing new multi-year highs.
“Be familiar with the concept of an ‘intervention period”,” said financial researcher Nick Bhatia.
“We will see that in UK yields, the central bank USDJPY panics, intervenes and arbitrage traders reduce it until the central bank has to bring in more.”