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Bitcoin erases earlier losses after inflation reading

Bitcoin’s value rebounded on Thursday after dropping to a low not seen since July 2 minutes following the release of September’s inflation reading that came in well above expectations.

Bitcoin was changing hands at $ 19,407 Thursday afternoon, up 1.35% in the last 24 hours. Shortly after the inflation release, bitcoin had plunged to $ 18,195, according to crypto indexer, CF Benchmarks.

Year-over-year inflation for last month was 8.2% for September, according to the government’s US Consumer Index Price (CPI), higher than Wall Street’s consensus expectations for 8.1%. Excluding food and energy, the core inflation rose 6.6% from a year ago, marking the highest level since 1982.

The data show that inflation is proving more difficult to tame despite multiple Federal Reserve interest rate hikes that have largely depressed stocks and cryptocurrency this year.

“A worse-than-expected inflation reading is anything but good for traders,” Michael Safai, a partner with crypto trading firm Dexterity Capital, told Yahoo Finance. But with the “less rosy outlook,” volumes picked up and some directional traders snatched bargains, he added.

When inflation has come in higher than consensus estimates this year, bitcoin has sold off an average of 4% in the 30 minutes following the economic release, according to Singaporean crypto fund QCP Capital.

Though today’s move fell in line with the 30-minute average, its still leaving plenty of market observers puzzled. While bitcoin held onto its $ 18,000 floor, it continues to trade in a muted range to equities.

The Nasdaq (^ IXIC) fell as much as 3.2% on Thursday, before closing up 2.23%. The S&P 500 (^ GSPC) lost as much as 2.4%, before ending 2.6% higher.

Over the past month, the Nasdaq and S&P 500 have each sold off by 13%. After having lost 56% in the second quarter, bitcoin has fared slightly better, down 4% for the same period.

Ether (ETH-USD), the second largest cryptocurrency, is down marginally, losing 0.26% on the day, trading at $ 1,294 per coin, while shares of Coinbase Global (COIN) ended Thursday down nearly 1%.

PARIS, ILE DE FRANCE - NOVEMBER 20: In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed in front of the Bitcoin course & # 39; s graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France .  Bitcoin is an electronic money that saw an incredible increase in 2017, its price rising up to 20,000 euros, but currently its price has dropped around 5,000 euros.  (Photo Illustration by Chesnot / Getty Images)

In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed in front of the Bitcoin course’s graph of Bitfinex cryptocurrency exchange website on November 20, 2018 in Paris, France. Bitcoin is an electronic money that saw an incredible increase in 2017, its price rising up to 20,000 euros, but currently its price has dropped around 5,000 euros. (Photo Illustration by Chesnot / Getty Images)

For cryptocurrencies, which have lost more than half of their value between April and July of this year, the picture shouldn’t be expected to improve, Mike Novogratz, founder and CEO of major crypto investment manager Galaxy Digital, told Yahoo Finance earlier this week .

“There is a tremendous amount of fear in the markets right now,” Novogratz said.

As of Thursday afternoon, the total market capitalization of crypto assets measured by Coinmarketcap has bounced from $ 923 billion to $ 881 billion back to $ 925 billion for the same 24-hour period.

“Revenue is coming down in the industry, [trading] volumes are down, excitement is down, “Novogratz said,” and this [crypto] winter could last longer than people think, it might be shorter. It’s hard to predict. “

“This is probably going to look like increased daily volatility until the market comes to some consensus but the path remains the same,” Ben McMillan, founder and chief investment officer with hedge fund IDX, told Yahoo Finance.

McMillan added that the narrative around an earlier-than-expected Federal Reserve pivot in monetary policy may be coming to bear in light of the possibility that liquidity could “dry up” in the US Treasury markets.

While that possibility may prove unlikely, he admitted, “I’m very curious what tomorrow is going to look like.”

David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers

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