Bitcoin fell 5.3% between October 9 and 10, hitting a three-week low of $58,900.

The market correction began after the US reported higher-than-expected consumer price inflation data, suggesting that traders are concerned that the Federal Reserve has less incentive to continue cutting interest rates in the near future.

Bitcoin Bitcoin $63,171 The reaction reflects investors’ views that there is a growing chance of an economic recession. The US Bureau of Labor Statistics reported a 0.2% increase in the consumer price index for September compared to the previous month, raising concerns about “stagflation.” In this scenario, prices continue to rise despite an economic recession, which runs counter to the central bank’s goal of stimulating growth while controlling inflation.

Meanwhile, U.S. jobless claims rose to a 14-month high, according to data released on Oct. 10. Initial claims for unemployment benefits unexpectedly rose to 258,000 by Oct. 5. While part of the increase can be attributed to a strike at Boeing, the broader negative impact on the economy remains a major concern for policymakers.

While there is no guarantee that Bitcoin’s price will be negatively affected if the US Federal Reserve is forced to adopt a tighter monetary policy, investors fear that an overheating economy could cause a stock market correction. As a result, traders’ sentiment is weakening, given the current high price correlation of 88% between the S&P 500 and Bitcoin.

In this context, it is natural to expect Bitcoin traders to become less bullish on short-term prices, especially after two consecutive days of outflows from U.S.-based Bitcoin ETFs. According to data from Farside Investors, these instruments saw net outflows of $59 million between October 8 and October 9, reversing the trend from the previous trading days.

Bitcoin’s slide accelerated after reports that market maker Cumberland DRW was sued by the U.S. Securities and Exchange Commission for operating as an “unregistered dealer” in cryptocurrency transactions. According to a statement from the regulator, the Chicago-based company profited from sales of crypto assets “similar to commodity sales.”

Bitcoin derivatives reflect short-term selling pressure

Regardless of whether these claims hold up in court, traders tend to seek protection when fear and uncertainty set in. When Bitcoin fell below $59,000, primary derivatives metrics showed weakness, suggesting less demand for leveraged (long) buying activity.

In neutral markets, the Bitcoin futures premium, which measures the difference between the monthly contracts and the spot market price on regular exchanges, should reflect an annual premium of between 5% and 10% (basis) to compensate for the longer settlement period.