Market Meltdown: Bullish Positions Suffer $860M in Liquidations Due to 9% Price Drop in Ethereum, Bitcoin, Ripple, Dogecoin
Headline: Unprecedented Sell-off in Crypto Market Triggered by U.S. Inflation Data
The crypto market has experienced a significant sell-off, with over $1 billion in leveraged crypto positions being liquidated, following the release of unexpected U.S. inflation data. This event has had a lasting impact on the market, particularly on Bitcoin.
Initial Impact on Bitcoin
In mid-August 2025, Bitcoin surged to a record high of around $124,000, driven by optimism tied to potential Fed rate cuts and institutional adoption. However, after a higher-than-expected inflation reading, Bitcoin dropped below $115,000 as fears grew that rate cuts might be delayed, which typically puts downward pressure on Bitcoin prices.
Leading up to the Consumer Price Index (CPI) report expected in mid-August, Bitcoin experienced bouts of volatility, initially surging past $122,000 then falling to around $118,000 as traders balanced optimism and downside risks linked to inflation results and Fed policy.
The correlation of Bitcoin with U.S. equities (about 0.76) means inflation data influencing risk sentiment on traditional markets also heavily affects Bitcoin's short-term volatility.
Trader Anticipation and Market Sentiment
Analysts and traders are positioning Bitcoin as a potential beneficiary if the Fed moves toward rate cuts in September, which would encourage risk-taking and could lead to a new Bitcoin rally. Conversely, a higher-than-expected inflation reading that weakens hopes for rate cuts tends to trigger caution or selling pressure in Bitcoin, reflecting its sensitivity to monetary policy and inflation expectations.
There is a broad consensus among some analysts that inflation in the U.S. is likely to remain elevated due to fiscal expansion and trade policies regardless of Fed's actions, which could sustain upward pressure on Bitcoin as an inflation hedge over the medium term.
Political and macroeconomic tensions, including the U.S. government’s debt levels and President Trump’s pressure on the Fed to cut interest rates significantly, add uncertainty. If the Fed yields to this and makes aggressive cuts, Bitcoin could surge as a risk asset and inflation hedge; if not, inflation pressure still supports Bitcoin’s narrative as a store of value.
Additional Market Dynamics
Long-term Bitcoin holders have reduced selling activity after heavy profit-taking in July 2025, suggesting growing conviction and reduced supply pressure. Institutional ETF inflows have played a role in the price rally earlier in August, but recent market declines have triggered portfolio rebalancing and some selling pressure as macroeconomic concerns intensified.
Historically, August and September have been weaker months for Bitcoin, but analysts note potential for a strong year-end rally, with some assigning around a 37% chance Bitcoin could hit $150,000 by year-end if macro conditions improve.
In summary, U.S. inflation data strongly influence Bitcoin's short-term price through effects on Fed rate cut expectations and risk sentiment. Traders currently anticipate that if inflation data confirm a path toward easing (rate cuts), Bitcoin may rally further, but persistently high inflation raising doubts about Fed easing keeps the market cautious. The interplay of inflation metrics, Fed communications, and political pressures creates a complex backdrop that Bitcoin traders closely monitor to anticipate future market direction.
In the aftermath of the U.S. inflation data release, the sell-off in the crypto market significantly impacted Bitcoin, causing it to drop below $115,000 due to fears of delayed Fed rate cuts, which typically put downward pressure on Bitcoin prices (finance, investing, crypto, bitcoin). Assets like Bitcoin, with a correlation to U.S. equities, are susceptible to inflation data influencing risk sentiment in traditional markets (finance, crypto, bitcoin, inflation).
