A stronger-than-anticipated inflation reading reminded investors that Bitcoin remains a highly volatile asset just hours after the digital currency soared to another record high.
The original cryptocurrency fell as much as 4.3% in the minutes after a government report showed US wholesale inflation accelerated in July by the most in three years. That sent stocks lower and tempered expectations for a reduction in interest rates, sending Bitcoin down from a high of $124,515 set late Wednesday in New York. The previous record was reached in July.
Bitcoin has been steadily rising for most of the past year as a result of the friendly legislative climate in Washington ushered in by President Donald Trump. Public companies, led by Michael Saylor’s Strategy, have boosted the demand by following an increasingly popular corporate tactic of stockpiling the original cryptocurrency. The playbook has recently spread to smaller competitors, like Ether, leading to a broad rise across digital assets.
Still, the retreat was quick Thursday. Leveraged bets on digital assets saw over $1 billion liquidations in the past 24 hours with $770 million and $269 million in long and short positions respectively, according to data complied by Coinglass.
The recent coordinated move between stocks and Bitcoin underscores how speculative market corners and mainstream benchmarks are drawing from the same well of optimism. Earlier this week, US inflation data landed in line with expectations this week — and strengthened bets the Federal Reserve will cut interest rates in September, easing financial conditions and encouraging capital to flow from blue-chip equities to volatile digital tokens. Traders pared those bets Thursday.
Ether’s rise has been propelled by sustained demand from newly active treasury firms, while Bitcoin’s steadier climb has leaned on persistent exchange-traded inflows even as it has faced technical resistance. However, the second largest token has seen most of the liquidations in leveraged bets amid the sharp drawdown.
“The combination of moderating inflation, growing expectations for rate cuts, and unprecedented institutional participation through ETFs has created a powerful tailwind,” said Ben Kurland, CEO at crypto research platform DYOR. “What’s different this time is the maturity of the demand base — this rally isn’t just retail euphoria, it’s structural buying from asset managers, corporates and sovereigns.”
Bitcoin’s market cap rose to around $2.5 trillion and Ether’s to nearly $575 billion, according to CoinGecko. Ether was trading just below its almost four-year old record on Thursday, changing hands at around the $4,600 level.
“Crypto has been positively correlated to equities with the relationship stronger for ETH than BTC,” said Chris Newhouse, director of research at Ergonia. “General sentiment looks positive.”
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