Bitcoin's price plummeted below $60,000, reaching an intraday low of $58,188 on June 25 before a slight recovery to $59,200. This sharp decline triggered a massive wave of liquidations across the cryptocurrency market, totaling nearly $1.48 billion. Long traders bore the brunt of these losses, accounting for $1.21 billion, while short traders lost approximately $270 million. Bitcoin alone saw roughly $665 million in liquidations, followed by Ethereum at $359 million and XRP at $50.5 million. The total cryptocurrency market capitalization also fell by 2.2% to $2.13 trillion.
The primary catalyst for this downturn was higher-than-expected U.S. inflation data. The Personal Consumption Expenditures (P.C.E.) price index increased 4.1% year-over-year in May, up from 3.8% in April, with headline P.C.E. rising 0.4% monthly. This data reinforced expectations that the Federal Reserve might maintain higher interest rates for longer, with Bank of America revising its outlook to expect three rate hikes this year. This hawkish sentiment from the Federal Reserve, combined with a strengthening U.S. dollar, has compounded pressure on risk assets like Bitcoin.
Adding to the market volatility, a significant Bitcoin options expiry event is approaching, with approximately $9.33 billion in Bitcoin options, representing 157,611 open contracts, scheduled to expire. Institutional demand for Bitcoin has also softened considerably, with U.S. spot Bitcoin exchange-traded funds (E.T.F.s) recording about $6.4 billion in net outflows over the past 30 days, marking the largest monthly redemption period since their launch. This shift in investment away from digital assets is also influenced by a broader reallocation of capital towards A.I. stocks and upcoming I.P.O.s like SpaceX, contributing to a "risk-off" sentiment.
