After rallying to weekly highs above $75,000, Bitcoin’s price traded sideways throughout the Asian trading hours on Wednesday.
The market held its breath ahead of the FOMC meeting and Fed Chair Jerome Powell’s subsequent press conference.
However, the release of a hotter-than-expected Producer Price Index (PPI), which surged 0.7% month-over-month, injected immediate volatility across the crypto markets.
The total crypto market cap reacted instantaneously to the inflationary data, dropping from intraday highs of over $2.6 trillion toward the $2.45 trillion mark.
This sharp correction wiped out much of the week’s early optimism as traders recalibrated for a potentially more hawkish Federal Reserve.
Top altcoins, which had shown modest gains or remained range-bound throughout the day, began falling in tandem with the broader market.
Why is Bitcoin price going down?
Bitcoin price began falling as markets reacted to the sobering PPI data.
US PPI inflation rose well above expectations in February, signalling persistent inflationary pressures in the US economy that the Fed has struggled to quell.
The Core PPI inflation came in even hotter, rising to 3.9% YoY (above estimates of 3.7%) and 0.5% MoM (above expectations of 0.3%).
This inflation data comes just ahead of the Fed rate decision today, where the Fed is likely to maintain current rates.
With this surprise jump in wholesale prices, the odds of a rate cut in the short term have diminished once again.
On Polymarket, the odds of “zero rate cuts” for the upcoming window jumped to 25% as hawkish sentiment took hold.
Meanwhile, the ongoing conflict between the US and Iran is adding more geopolitical risk to the mix.
Markets were already falling in response to reports of an attack on Iran’s South Pars gas field, and now the escalating situation could further pressure prices if key support levels fail to hold.
Sentiment has soured over the past 24 hours as the Crypto Fear and Greed Index fell 6 points to 43, officially crossing over into ‘Fear’ after spending just a few days within neutral levels.
A wave of long liquidations is now adding to the downward pressure.
As Bitcoin’s price began falling, over-leveraged long positions started to hit their stop-loss levels, triggering an automated sell-off that accelerated the slide.
Over $165 million worth of positions had been liquidated from the crypto markets in the just the past 4 hours at the time of writing.
The vast majority of this carnage was driven by long-side wipes, with over $61 million in liquidations coming from Bitcoin alone as it struggled to maintain its footing above key support levels.
Will Bitcoin price crash?
Based on current price action, there’s a chance that Bitcoin price may extend its decline and fall to multi-month lows around $65,000 if the key psychological support at $70,000 fails to hold.
A break below $70,000 could open the door for a sharper downside move, as it may trigger another wave of liquidations and force leveraged positions to unwind further.
At the same time, the broader market environment remains fragile, with sentiment closely tied to whether buyers step in to defend current levels or allow the trend to slip further.
Over the past few days, spot Bitcoin ETFs in the US have reversed course and recorded back-to-back inflows after a period of outflows, indicating a return of institutional demand.
Meanwhile, significant regulatory developments have also provided some clarity, with the US SEC stating that many crypto assets may not qualify as securities under current interpretations.
Such positive catalysts, alongside steady buying pressure from large investors and ETF inflows, could help mitigate downside risk and reduce the likelihood of a deeper correction if support levels continue to hold.
According to Bitcon’s 24-hour liquidation heatmap, there’s significant concentration of liquidity remaining just below the current price action, specifically near the $71,800 mark.
These areas tend to act as price magnets, and as such, Bitcoin could continue to drift lower.
At presstime, Bitcoin price was trading at $71,783, down over 3% in the past 24 hours.