Crypto Crash Alert: Market Tumbles as U.S. Inflation Soars and Investors Cash Out!

Market Plummets Amid Inflation Surge

Hold onto your hats, folks! The crypto market took a nosedive on July 16 as U.S. inflation data spiked, crushing hopes for a Federal Reserve rate cut. Meanwhile, savvy investors were cashing in their chips after recent market highs.

Market Cap and Major Coins Take a Hit

Brace yourselves! According to the latest numbers from CoinGecko, the total crypto market cap crashed from a cool $3.91 trillion to a mere $3.78 trillion in just 24 hours.

Bitcoin (BTC) plummeted from around $120,000 yesterday to a gut-wrenching low of $116,000 today. Ethereum (ETH) couldn't hold its ground either, slipping below $3,000, while XRP (XRP) took a 5% hit, dropping from $3.02 to $2.78.

But wait, it gets worse! Dogecoin (DOGE) led the pack in the fall, crashing 8%. Toncoin (TON), Litecoin (LTC), and Bittensor (TAO) weren't far behind, all taking significant hits over the last day.

Liquidations and Market Pressure

Get this: nearly $549.3 million in crypto positions were wiped out in the last 24 hours, according to Coinglass data. Most of those losses? Long positions, putting even more pressure on the already struggling market.

U.S. Tariffs and Inflation Stir the Pot

The market's wild ride didn't come out of nowhere. Traders were glued to the latest U.S. tariff drama, and the June consumer inflation report was the first sign of tariff-driven price hikes.

The Consumer Price Index spiked 2.7% annually and 0.3% monthly, marking the sharpest rise in five months. Blame it on those U.S. tariffs hitting major trading partners.

And if that wasn't enough, President Trump threw another curveball, threatening 100% secondary tariffs on any country still trading with Russia if they don't make peace with Ukraine in the next 50 days.

Fed Rate Cut Hopes Dashed

With all this chaos, expectations for a Federal Reserve rate cut in July have gone up in smoke. Analysts now think the Fed will keep rates steady, maybe even holding off on a cut until September.

Some experts are warning the Fed to tread carefully. Maksym Sakharov, CEO of WeFi, a decentralized on-chain bank, told us the Fed should look to the UK for guidance, but not in the way Trump wants.

“The Fed needs to follow the footsteps of the UK,” Sakharov said, “but not as Trump expects. President Trump's call for a rate cut down to 1% from the current 4.5% is a bold move for spenders, but it could crush savers. Sure, the U.S. should cut rates, but we need to keep it under control,” he added.

Sakharov also warned that slashing rates too hard could push investors into risky assets and throw markets into chaos.

And if you thought that was all, think again. The CME Group’s FedWatch Tool shows the chances of a September rate cut have dropped to just 52.5%, down from over 80% a week ago.

Higher Rates and Market Dynamics

Historically, higher interest rates make riskier assets like crypto less appealing by tightening the cash flow. On the flip side, rate cuts can boost liquidity and get the market pumping.

Profit-Taking and Technical Indicators

But wait, there's more! The downturn got even worse as traders started cashing out after Bitcoin hit an all-time high of $123,091 on Monday.

Long-term investors often sell at the peak, and this time, the fear of a hawkish Fed decision might have tipped the scales. Glassnode data reveals that investors holding BTC for over 5 months made up 56% of the profit-takers, locking in gains worth about $1.96 billion.

And if you're looking for more signs of trouble, the crypto market's Relative Strength Index is sitting at a whopping 73. That's a clear sign it's overbought and could be in for a short-term dip or some sideways action soon.

Disclosure: This article isn't your financial advisor. It's just here to keep you in the loop and maybe teach you a thing or two about the wild world of crypto.