Bitcoin just went on a wild ride, hitting an all-time high only to pull back sharply. This sudden shift wiped out more than $675 million in long positions for traders betting on a continued rise. It was a tough lesson for those who got too comfortable too quickly.
Just yesterday, Bitcoin, the world’s largest and oldest cryptocurrency, celebrated a new price record against the U.S. dollar. On Wednesday, August 13, it soared past $124,000, a level it had never touched before.
This incredible surge cemented Bitcoin’s spot as the fifth-largest asset globally. Its market value hit an unprecedented $2.5 trillion, even moving past Google’s valuation. Bitcoin had set its previous record, reaching $123,000 with a $2.45 trillion market cap, just a month earlier. The crypto market as a whole also saw a boost. Other digital coins like Ethereum (ETH) and Solana (SOL) jumped over 5% on the same day. This widespread rally pushed the total cryptocurrency market value to a new peak of $4.2 trillion yesterday.
What Drove the Market Higher
Early in the week, an unexpected rise in core inflation numbers in the U.S. sparked excitement. It fueled hopes that the Federal Reserve would cut interest rates next month. This news gave the cryptocurrency market a significant lift.
Following the inflation report on Tuesday, market players quickly upped their bets. They now see over a 90% chance of a Fed rate cut at the upcoming September meeting. The CME FedWatch tool, a widely watched indicator, shows a 97.8% chance of a 25 basis point cut and a 2.2% chance of a 50 basis point reduction.
These market sentiments align with predictions from decentralized betting platforms. Polymarket, a popular prediction market, shows an 80% chance of a 25 basis point cut in September. The odds for a larger 50 basis point cut also climbed to 8.3%, as noted by CoinDesk.
Other positive forces also helped the crypto market. These include a friendlier regulatory environment in the United States and easing geopolitical tensions around the globe. Businesses are showing more and more interest in cryptocurrencies. Many public companies are even adding crypto to their own balance sheets, which shows this growing appeal.
Bitcoin’s Sudden Drop
Despite these promising signs, Bitcoin couldn’t hold onto its recent gains. After peaking at $124,128 on Wednesday night (ET), the leading cryptocurrency has since fallen. It’s now trading around $118,620, a drop of 4.3%, according to CoinGecko data at the time of writing.
The downturn happened right after the U.S. Producer Price Index (PPI) was released. This indicator, which measures the prices of goods and services at the wholesale level, came in higher than expected. It rose 0.9% for the month and 3.3% year-over-year. This marks the biggest 12-month jump since February, well above the Fed’s 2% inflation target, as reported by CNBC.
The widespread price drop across the cryptocurrency market hit bullish traders hard. Over $670 million in leveraged long positions were liquidated in the last 24 hours, data from Coinglass shows. In total, the crypto market saw liquidations exceeding $1 billion during this period, affecting both long and short bets. Bitcoin and Ethereum traders bore the brunt of these losses. In the past 24 hours, 219,255 traders lost money. The largest single liquidation was a $10 million BTC/USD trade on the Bybit exchange.
As this article was being written, Bitcoin briefly dipped below $119,000, marking a 1.5% drop in 24 hours. This, combined with the massive liquidations, signals a period of high volatility in the market right now.
Sources:
CoinGecko
CME FedWatch Tool
Polymarket
CoinDesk
CNBC
Coinglass