PPI data exceeds expectations, impacting the crypto market, with BTC and ETH experiencing their largest correction of the month

The recent release of the US Producer Price Index (PPI data) has triggered intense market volatility. Official figures show that the PPI increased by 3.3% year-on-year, far exceeding market expectations of 2.5%. This significant gap directly impacted investors’ expectations for rate cuts. Meanwhile, the unemployment figures released were relatively stable, but the unexpectedly high PPI data became the main focus of market attention.

Why US PPI Data Has Become a Signal for Crypto Market Reversal

PPI data reflects changes in production costs. The higher-than-expected figures suggest two major market concerns: first, rising domestic production costs; second, soaring prices of imported raw materials. The market generally interprets this as tariffs beginning to have a tangible impact on the price system, indicating potential signs of inflation heating up. This signal directly undermines market expectations for rate cuts—if inflationary pressures rise, the Federal Reserve is likely to pause or reconsider its easing policies.

Investors initially expected that as long as economic data remained neutral before September, the pace of rate cuts could proceed steadily. However, the better-than-expected PPI data shattered this consensus, triggering panic across the market.

Liquidation Wave Impact: Over $400 Million Liquidated in Just 20 Minutes

Following the PPI release, the cryptocurrency market instantly plunged into a sell-off. Bitcoin briefly dropped to around $89,000, while Ethereum fell below the $3,000 support level. In just four hours, a total of $660 million in positions were liquidated across the network, with an astonishing $420 million occurring within 20 minutes after the data was announced—reflecting extreme market panic at that moment.

Liquidations were concentrated among long positions, with Ethereum longs being the biggest victims. This concentrated liquidation exposes a structural risk: during recent rallies, a large number of leveraged longs accumulated at high levels without sufficient stop-loss setups. Once market sentiment reverses, it can easily trigger a chain of liquidations.

Subsequent Risk Warning: Retail Sales Data Will Re-Test the Market

Although the liquidation wave caused short-term pain, it also provided a healthy correction opportunity, helping to cool overheated investor sentiment. However, risks have not been entirely eliminated. The US will soon release retail sales data, an important indicator for the Federal Reserve to assess inflationary pressures. If retail sales data again deviates significantly, the market could repeat yesterday’s intense volatility.

After consecutive days of gains, most cryptocurrencies are now showing overbought signals, with higher adjustment risks. Investors should closely monitor upcoming economic data and review their position risks, especially those with high leverage, and remain vigilant.