Bitcoin drops below $80,000 as US inflation surge triggers $939 million in crypto liquidations

Bitcoin hits $79,730 before recovering to $82,000

Bitcoin dropped to an intraday low of $79,730 on Wednesday before bouncing back to around $82,000. The selloff came after the US government reported that wholesale inflation surged far more than economists expected, raising fears the Federal Reserve may raise interest rates again.

The price swing wiped out nearly $940 million in cryptocurrency leveraged positions. According to CoinGlass, 176,506 traders were liquidated. The largest single hit was a $12 million Bitcoin trade closed on Binance.

Hot inflation data upends market expectations

The Labor Department reported that US producer prices jumped 1.3% in September, the biggest monthly gain since March 2022. Annual wholesale inflation climbed to 6.3%, the highest level in nearly four years.

Core producer prices, which strip out volatile food and energy costs, rose 0.7% against a 0.3% forecast, pushing the annual rate to 5%. The reading came a day after consumer inflation came in at 3.7%, suggesting price pressures are spreading beyond energy into everyday goods.

Ricky Ho, chief investment officer at a single-family office, called the core reading especially worrying because it signals businesses face broad cost increases that could eventually be passed to consumers. He warned this could keep the Fed stuck with tight monetary policy for longer.

Despite the inflation shock, the 10-year US Treasury yield fell to about 5.06% as investors fled into government bonds during a broader technology-stock selloff. Mohamed El-Erian of Allianz said the drop reflected growing worries about tech-sector resilience and rising borrowing costs.

Options traders scale back Bitcoin's $100,000 target

Cryptocurrency derivatives traders have shifted their outlook sharply. Nick Forster of options platform Derive noted that the odds of Bitcoin falling below $80,000 by Friday's contract expiry nearly doubled in 24 hours, jumping from 9.5% to 18.4%.

Meanwhile, the probability of Bitcoin reaching $100,000 by Christmas was slashed to just 9.7%. A $12 billion options expiry looms on October 30, with heavy positioning clustered around the $78,000 and $95,000 strike prices, which could amplify Bitcoin's next big move.

Fed rate-hike odds cool despite inflation surprise

Futures markets briefly priced in nearly a 50% chance of an October rate hike after Wednesday's consumer inflation report. But those expectations retreated, with the odds falling below 30% even after Thursday's producer-price data.

Can-Luca Köymen, an investment strategist at Swiss digital-asset bank Sygnum, told CryptoSlate the latest numbers still strengthened the case for tighter policy. He said: "0.7% core PPI confirms the CPI signal rather than fading it: a 28 October hike moves from a tail to a live risk."

What is confirmed

Bitcoin fell to $79,730 before recovering toward $82,000. $939.24 million in crypto positions were liquidated across 176,506 traders, with a $12 million Binance liquidation being the largest. US producer prices rose 1.3% in September and 6.3% annually. Core PPI rose 0.7% versus 0.3% expected. The 10-year Treasury yield fell to about 5.06%. The odds of a Bitcoin drop below $80,000 by Friday's expiry rose to 18.4% from 9.5%. The odds of Bitcoin hitting $100,000 by Christmas dropped to 9.7%. A $12 billion options expiry occurs on October 30.

What is still unclear

It remains uncertain whether the Federal Reserve will raise rates at its October 27–28 meeting. Rate-hike futures dropped below 30%, but some analysts still see a hike as a live possibility.

Why this matters for crypto investors

Leveraged trading amplifies both gains and losses. When Bitcoin moves against highly geared positions, liquidations force automatic selling, which can accelerate price declines. The sharp drop in Bitcoin's $100,000 odds and the looming $12 billion options expiry suggest traders expect heightened volatility in the coming days.

• CryptoSlate