On May 16, the cryptocurrency market witnessed a staggering loss of nearly $90.3 billion within a single hour, causing Bitcoin’s price to drop to $77,678 and triggering widespread liquidations.

The total market valuation of cryptocurrencies plunged by $90.3 billion in under an hour on May 16, reflecting a 3.37% decline to about $2.59 trillion. Bitcoin (BTC) was valued at $77,678, while Ethereum (ETH), XRP, Solana (SOL), and Dogecoin (DOGE) faced losses ranging from 3.5% to 6%.

This sell-off extended beyond the crypto realm; it originated from a macroeconomic repricing event impacting global risk assets.

Recently released U.S. PPI figures exceeded analysts’ expectations by approximately 6%, marking the highest since December 2022. Earlier, the April CPI registered at 3.8%. These two inflation reports dashed near-term hopes for Federal Reserve rate cuts, prompting a CME FedWatch indication of over 44% likelihood of a rate hike by December. Consequently, traders were quick to sell off risk assets.

Bitcoin’s price movements closely followed those of the iShares Russell 2000 ETF (IWM), which tracks U.S. small-cap stocks sensitive to rate expectations. Following the unfavorable inflation data, small-cap stocks plummeted, leading to a similar response from Bitcoin.

Institutional selling worsened the macro impact

U.S. spot Bitcoin ETFs experienced $290 million in outflows on that day, concluding a six-week period of inflows. BlackRock’s IBIT was the major contributor to these outflows, accounting for about $136 million in redemptions. In total, Bitcoin ETF outflows over the past week reached roughly $1.15 billion, according to SoSoValue data.

Analyst Ali Martinez noted on X that Bitcoin miners liquidated nearly 800 BTC, valued at approximately $64 million, in the four days leading up to this incident, intensifying supply pressure at a critical moment. “This increase in selling pressure could soon impact price movements,” Martinez warned.

The interplay of macro-driven selling and institutional redemptions stripped away two vital demand layers, leaving the market susceptible to the leveraged long positions established during the preceding inflow phase.

Liquidation cascade hastened the downturn

As spot prices began to decline, the derivatives market worsened the scenario. Data from CoinGlass reveals that nearly 154,000 traders faced liquidation within 24 hours, resulting in a loss of around $696 million from the derivatives market. Bitcoin liquidations surged by 125%, totaling over $235 million. The overall open interest in crypto derivatives decreased by more than 25% as traders rapidly exited their leveraged positions.

Crypto trader Ted Pillows warned on X that Bitcoin has dropped below a crucial multi-month ascending channel on the daily chart, confirmed by two successive red candles. “If BTC falls below the $78,000 level, it could quickly plunge to the $74,000–$75,000 range,” he stated.

Analysts suggest that should this technical break be sustained, it may set the stage for a more significant correction, with the $70,000–$68,000 range identified as the next crucial downside target.

Altcoins suffered even more severe losses compared to Bitcoin. XRP, Solana, BNB, Hyperliquid, Zcash, Dogecoin, Chainlink, and Cardano all exhibited significant declines as market sentiment shifted decisively towards a risk-off approach, mirroring patterns observed whenever macro data has taken a hawkish turn this year.