Over $500 million in cryptocurrency positions were liquidated in the past 1 hour as investors reacted sharply to the latest U.S. Producer Price Index (PPI) report. The hotter-than-expected inflation data has effectively eliminated near-term expectations for Federal Reserve interest rate cuts, sending bearish threat through the crypto market.
US PPI Data Comes in Hot
Worries about inflation came back on Thursday morning in the U.S., causing riskier investments, including cryptocurrencies, to drop sharply.
The July Producer Price Index (PPI), which measures wholesale prices, jumped 0.9%, far higher than the expected 0.2% and June’s flat reading. Compared to last year, PPI rose 3.3%, also above forecasts of 2.5% and June’s 2.4% increase.
A stronger-than-expected PPI report is often seen by economists as a positive sign for the U.S. dollar, as it can indicate rising inflation pressures earlier in the supply chain. The large increase in the latest data gave the dollar a quick boost.
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Core PPI, which leaves out food and energy prices, jumped 0.9% in July, much higher than the 0.2% that was expected and June’s flat reading. Over the past year, core CPI also rose by 3.7%, beating forecasts of 2.9% and up from 2.6% in June.
Some experts also pointed to bearish effects from tariffs introduced during the Trump era as a factor behind the price increases. The unexpectedly high inflation reading raised concerns that the Federal Reserve might have to keep interest rates increased for longer to keep inflation in check.
This change in market sentiment led to a sell-off in riskier assets like Bitcoin (BTC), as investors shifted toward the strengthening dollar. Despite this, the CME FedWatch tool still puts the likelihood of a rate cut on September 17 at 96.5%.
After reaching a record high of over $124,000 overnight, Bitcoin dropped below $119,000 following the news. Ether (ETH) also fell sharply, losing nearly 4% to trade around $4,500. Other altcoins that had recently been surging, like Solana and XRP, also saw significant declines.
Over $500 Million Liquidation in 1-Hour
New labor market data didn’t ease concerns either. Jobless claims for the week ending August 9 came in at 224,000, slightly below the expected 228,000, and ongoing claims stayed at 1.95 million.
The still-strong job market, along with the hotter-than-expected PPI report, added to expectations that the Federal Reserve may keep interest rates higher for longer to fight inflation.
According to Coinglass, the sharp drop in Bitcoin’s price following the U.S. PPI report led to a major wave of crypto liquidations. In just the past hour, over $580 million in trading positions were wiped out.
Most of the losses, around $573 million, came from long positions, with only $8 million from shorts. This marks a big reversal from just a day earlier, when Bitcoin had surged to a new all-time high.
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