Ethereum Plummets 7% – $106 Million in Longs Liquidated in One Hour

Inflation in the US accelerated more than expected. After the report was released, long positions on ETH worth $106 million were forcibly closed on Binance within an hour. This is the largest wave of liquidations in six months. Liquidation is the forced closure of a leveraged trade when the price moves against the trader. According to CryptoQuant analyst Darkfost, after the report's publication, ETH depreciated by approximately 7%: from $2,500 to $2,350.

Consumer prices in the US rose by 0.6% in September. In August, the increase was 0.4%, and economists had expected 0.5% on average. The acceleration is linked to energy: gasoline prices rose by 34.2% year-on-year compared to 27.4% a month earlier, and heating oil by 74.2% after 52%. The pressure on prices is not limited to energy: core inflation, which excludes food and energy, accelerated from 2.4% to 2.6% year-on-year. According to Darkfost, expensive fuel is starting to spill over into prices in the rest of the economy: airline tickets are noticeably more expensive, and housing costs continue to have a strong impact on the index.

Derivative contracts, particularly on ETH, were the first to react. According to the analyst's estimate, the trading volume of futures is now nine times the volume of actual coin purchases, so the price reacts more sharply to macro data. The probability of a Fed rate hike increased from 17% to almost 30% over the week.

The sell-off occurred in a thin market. According to CryptoQuant, the ETH liquidity indicator on Binance dropped to about -1.00 a few days earlier, the lowest in almost seven months. When there are few counter orders on the exchange, a cascade of liquidations moves the price more than usual. Additionally, US spot Ethereum ETFs have been losing funds for ten consecutive trading days, with outflows exceeding $780 million. Santiment analysts noted the hype around the coin on social media and considered mass optimism a less reliable support for recovery than fear.

At the end of September, CryptoQuant analyst GugaOnChain described a decrease in liquidity in the Bitcoin market: trading volumes dropped significantly, and large holders accumulated $14.09 billion in paper profits. At the same time, XWIN Japan warned that persistent inflation could increase US government bond yields and the dollar exchange rate, reducing demand for risky assets.