Just the day before, there was celebration over Bitcoin breaking the $124,000 new high, but that night the cryptocurrency market experienced a 'bloodbath'. Bitcoin plummeted by 5% within an hour, dropping below $118,000; Ethereum fared worse, crashing 6% to around $4,500; meme coins like Dogecoin led a collective dive among altcoins, with declines exceeding 10%, completely extinguishing the previously high FOMO (fear of missing out) sentiment in the market.
In just 24 hours, the cryptocurrency market lost $264 billion in market value, with 215,000 investors facing liquidations and total losses reaching $1.03 billion, of which 80% were long positions betting on price increases. According to statistics, a large investor lost $6.5 million on a single transaction when trading ETH/USDT contracts on the OKX platform, illustrating the severity of the situation.
The 'trigger' for this crash was the unexpected surge in the US Producer Price Index (PPI) for July. Data shows that the PPI rose by 0.9% month-on-month in July (market expectation was only 0.2%), and the year-on-year increase even climbed to 3.3%. The soaring production costs have raised concerns about 'inflation reigniting', sweeping through the market and directly changing investors' expectations for monetary policy - previously, the market expected over 70% probability of a rate cut in September, but it has now plummeted, with some voices speculating that 'rate hikes may restart'.
Under the pressure of high interest rate expectations, hot money is accelerating its withdrawal from high-risk assets. Not only is the cryptocurrency market under pressure, but the US tech sector is also weakening, with the Nasdaq index falling by 0.9% on the same day. The sharp decline in the cryptocurrency market has triggered a chain reaction of 'leveraged liquidations': the sudden drop in Bitcoin directly triggered $577 million in liquidation orders; the liquidity on exchanges has dried up sharply, and a sell order of $8 million can significantly lower prices; coupled with miners and ETFs continuously hoarding coins, this has further intensified market volatility.
US Treasury Secretary Yellen's remarks became an additional blow. Her initial statement that 'the government does not buy Bitcoin' shattered some investors' fantasies of a 'national team rescue'. Although she later clarified that 'seized Bitcoins will be retained', panic has already spread. Additionally, Hong Kong's strict regulation on stablecoins, tariff threats from Trump's team, and ongoing geopolitical conflicts have compounded negative sentiment, driving market risk appetite to a low point.
However, the crash does not mean the end of the cryptocurrency market; blindly trying to bottom out is the real risk. In the current market environment, three main principles should be followed:
1. Firmly remove leverage, avoid high-risk contract trading, and prevent liquidation triggered by short-term volatility;
2. Stay away from altcoins, especially meme coins that lack value support, and focus on leading coins like Bitcoin and Ethereum, patiently waiting for signals of liquidity release from policymakers;
3. If there is still a need for trading, focus on the Ethereum ecosystem - if the Ethereum ETF is approved, it is expected that tens of billions of dollars will flow in, potentially bringing structural opportunities.
The cryptocurrency market has always followed the pattern that 'bull markets rely on waves, bear markets rely on endurance'. Before market liquidity warms up, the safest strategy is to 'stay low and avoid unnecessary actions', reducing unnecessary operations and waiting for a clear shift in market sentiment and policy environment.
