U.S. stocks and crypto came under pressure again last night. The Nasdaq fell 0.91%, the S&P 500 dropped 0.4%, and Nvidia fell another roughly 2%. More painfully, BTC broke below $70,000, triggering a wave of liquidations among leveraged long positions. U.S. inflation data released most recently came in slightly below expectations, so why is the market still unimpressed?
① U.S. PPI came in below expectations, but inflationary pressures are far from easing. PPI released last night rose 0.3% month over month in October, slightly below market expectations, but was up 6.5% year over year. This shows that price pressures at the producer level remain significant. The softer data might normally ease concerns about rate hikes, but the market is more focused on whether inflation will persist and whether the Federal Reserve will continue tightening policy.
② Expectations of Fed rate hikes are still weighing on risk assets. The market is mainly betting on a 25-basis-point hike in December, while some traders are even considering the possibility of a 50-basis-point hike. The U.S. 10-year Treasury yield had already climbed to around 5.1%. The higher the yield, the greater the opportunity cost of holding volatile assets. However, if yields fall and rate-hike expectations cool, BTC and ETH may also get some breathing room.
③ The Nvidia turmoil is still weighing on tech stocks. Since Jensen Huang stepped down as CEO, Nvidia has remained under pressure, falling about 2% again last night. Semiconductor and data-center-related stocks have also been affected. This does not mean Nvidia’s AI business has suddenly lost its value, but the market is reassessing the risks of tech stocks. When investors reduce their positions in high-valuation tech stocks, the crypto market can also feel the indirect impact of declining risk appetite.
④ Leverage issues of BTC itself are amplifying the decline. When BTC previously fell below $70,000, more than $1 billion in crypto positions were liquidated within a short time, with longs making up a relatively large share. Macroeconomic pressure may have been the trigger, but successive liquidations further amplify volatility. Whether ETF flows can improve is also more worth watching than simply waiting for a rebound in U.S. stocks.
Today is Saturday, and the U.S. stock and Treasury markets are closed, while BTC and ETH continue trading around the clock. With traditional markets providing few new price signals over the weekend, it is especially important to watch for changes in liquidity and leverage in the crypto market.
Today, keep an eye on three things: whether spot buying in BTC and ETH recovers over the weekend; whether leveraged liquidations continue to mount; and the latest ETF flow data, as well as risk appetite after U.S. markets open next Monday.
PPI came in slightly below expectations, yet BTC continues to weaken. What do you think the crypto market needs most right now: a dovish turn from the Fed, or a return of institutional inflows?