Bitcoin Hits 21-Month Low as US Inflation Sparks Another Liquidation Cascade

The cryptocurrency traded at $58,800 at 13:45UTC on 25 Jun, down about 3.5% over the previous 24 hours to its weakest level since September 2024. More than $450mn of leveraged long crypto positions were liquidated within an hour as traders rushed to unwind bullish bets following the data release, according to analysis from The Kobeissi Letter.  

The sell-off followed the release of the US May Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge. Headline PCE accelerated to 4.1% year-on-year, the highest level since 2023, while core PCE rose to 3.4%, reinforcing expectations that US interest rates are likely to remain elevated until inflation eases. 

In periods of high inflation, safer investments become more attractive than riskier assets such as Bitcoin and technology stocks. 

The inflation report also validated the Federal Reserve's more hawkish stance adopted earlier this month. At its 17 Jun meeting, the US central bank left interest rates unchanged and raised its inflation forecasts. Officials projected inflation of 3.6% next year, up from a 2.7% forecast in March, while removing language from that had previously been interpreted as signalling future rate cuts. 

Can-Luca Köymen, investment strategist at Sygnum Bank, said Thursday's data reinforced the view that the Fed is unlikely to rush into lowering borrowing costs. 

"This is a print-by-print Fed now, and the number that also matters is this core PCE print, not just CPI, since that's the Fed's preferred gauge," Köymen said. "We should also expect less forward guidance from here onwards, something Chair Warsh signalled clearly at his first meeting. Our base case... is the Fed holding across the next two to three meetings, even though Fed funds futures currently price around a 52% chance of a cut in September." 

Macro trigger 

US equity markets opened lower immediately after the inflation report, with the Nasdaq Composite dropping more than 1% in early trading. Bitcoin, which had been trading just above an important technical support level near $60,000, followed equities lower. 

The move extended a sharp deleveraging across crypto markets that began a day earlier. On 24 Jun, more than $406mn in leveraged positions were liquidated, according to CoinGlass. 

The latest sell-off also follows several sessions of net outflows from US spot Bitcoin exchange-traded funds (ETFs), which have reduced a key source of institutional demand. Investors withdrew $469mn from the funds on 24 Jun, according to SoSoValue, with BlackRock's iShares Bitcoin Trust recording $239.3mn in outflows. 

Leverage unwinds 

The move also came one day before roughly $10bn worth of Bitcoin options contracts are due to expire, one of the largest expiries of the month. 

Options are derivatives that give investors the right, but not the obligation, to buy or sell Bitcoin at a predetermined price before a specified date. Large expiries often increase market volatility as traders hedge positions or unwind bets ahead of settlement.