Cryptocurrency Market Under Pressure: Consequences of Dollar Growth and CPI Data

The cryptocurrency market faces pressure amid the rising dollar and uncertainty regarding consumer price index (CPI) data. On October 14, the US will release CPI data for September. This is a significant event, considering that the CPI rose by 3.4% year-over-year in August, with monthly inflation increasing by 0.4%. Persistent inflationary pressure forced the Federal Reserve to raise the rate by 0.25% in September, and the CPI data will significantly influence the central bank's decision at the FOMC meeting scheduled for October 28.

The dollar index (DXY) exceeded 102 for the first time in five weeks, aiming for the best week since early March 2025. A rising dollar is typically considered a negative factor for the prices of risky assets like cryptocurrencies. Currently, capital is flowing back into safe assets, which explains the decline in cryptocurrency prices. A strong dollar reduces the ability of other countries to service dollar-denominated debts, harming the global economy. As a result, investors are selling risky assets—bitcoin and altcoins—and moving funds into more reliable bonds, which in turn lowers their yields.

However, a stronger dollar makes imports cheaper for the US, which could reduce inflation. Meanwhile, market expectations for a rate hike have fallen to 19% from 42% a month earlier, while the probability of maintaining rates has risen to 80% from 51%. It seems the market expects the Fed to leave rates unchanged for now, and a higher dollar could potentially reduce inflation.

Why cryptocurrencies are falling more than repositioning before the CPI suggests

According to CoinGlass, over the past 24 hours, the cryptocurrency market has seen more than $800 million in liquidations, with over $600 million being long positions betting on price increases. The total crypto market capitalization is testing the support level of $2.7 trillion. Given the upcoming CPI data, this could be a healthy market reset if buyer confidence remains.

The fear and greed index in the crypto market fell to 57—almost 20% over the same period. This indicates that market confidence is beginning to wane, even though bitcoin has fallen below $82,000.

Despite falling rate hike expectations and ongoing leverage reduction, the market is too weak to absorb selling pressure while the US dollar continues to strengthen. In such conditions, the upcoming CPI report could be a critical factor determining market direction and the prospects for risky assets. Currently, the decline appears to be more than just short-term repositioning.