The cryptocurrency market experienced significant turbulence this week as Bitcoin slipped below the $90,000 mark, marking its most substantial decline since September. The premier digital asset retreated from its recent all-time high of $98,450, settling around $88,700 by Thursday afternoon—a 9.8% drop that has left investors questioning whether the bull run is losing momentum.
This pullback coincides with growing market anxiety ahead of tomorrow’s critical U.S. Consumer Price Index (CPI) report. The December inflation data, set to be released Friday morning, has cast a shadow over risk assets as traders brace for potential signals about the Federal Reserve’s next moves in 2025.
“We’re seeing classic pre-inflation report positioning,” explains Maya Rodriguez, chief market strategist at Quantum Capital. “After Bitcoin’s remarkable 340% gain since last January, institutional investors are taking profits and reducing exposure until they get clarity on the inflation trajectory.”
The correlation between Bitcoin and traditional risk assets has strengthened in recent months, with cryptocurrency markets increasingly responsive to macroeconomic indicators. This evolving relationship reflects Bitcoin’s mainstream adoption but also exposes it to broader market forces.
Data from CryptoQuant shows approximately $1.2 billion in long positions were liquidated during the past 48 hours, exacerbating the downward price action. These forced sales created a cascade effect across the crypto ecosystem, with Ethereum dropping 12% to $5,300 and other major altcoins experiencing even steeper declines.
The market reaction underscores lingering concerns about inflation persistence despite the Fed’s aggressive tightening cycle over the past three years. November’s CPI reading surprised to the upside at 2.8%, and economists surveyed by Bloomberg expect December’s figure to hold steady rather than continue the disinflationary trend seen in mid-2024.
“Bitcoin remains acutely sensitive to inflation expectations because it challenges the digital asset’s narrative as an inflation hedge,” notes Dr. James Chen, research director at the Digital Assets Policy Institute. “If tomorrow’s CPI print comes in hot, we could see further selling as traders anticipate a more hawkish Fed approach through 2025.”
The timing of this correction is particularly noteworthy given that Bitcoin has historically performed well in the months following a halving event, which occurred in April. While the post-halving rally materialized as expected, reaching new highs in November, the sustainability of this cycle’s growth is now being tested against a complex macroeconomic backdrop.
The broader context reveals additional headwinds beyond inflation concerns. Regulatory developments in major markets, including the SEC’s ongoing scrutiny of certain crypto exchanges and the European Union’s implementation of MiCA regulations, have contributed to market uncertainty. Meanwhile, on-chain metrics show a gradual increase in selling pressure from long-term holders who entered positions during the 2022-2023 bear market.
“What we’re witnessing isn’t just about tomorrow’s inflation report,” says Elena Tarkovsky, cryptocurrency journalist and market analyst. “It’s the convergence of macro factors, profit-taking after a spectacular run, and the reality that institutional involvement brings volatility around key economic events.”
Interestingly, while spot trading volumes have surged during the downturn, the derivatives market tells a more nuanced story. The funding rate for perpetual futures contracts remains slightly positive, suggesting that leveraged traders maintain an optimistic outlook despite the current price action.
The pullback has triggered renewed debate about Bitcoin’s fair value in the current economic landscape. Proponents point to institutional adoption milestones achieved in 2024, including BlackRock’s Bitcoin ETF surpassing $25 billion in assets under management and major corporations adding Bitcoin to their treasuries.
Critics counter that Bitcoin’s volatility around inflation data contradicts its positioning as “digital gold” and raises questions about its efficacy as an inflation hedge. However, year-to-date performance comparisons still heavily favor Bitcoin over traditional safe-haven assets like physical gold, which has gained approximately 15% in 2025.
For retail investors caught in the crossfire of these market moves, financial advisors recommend maintaining perspective. “Price corrections of 10-15% have occurred multiple times during previous bull markets,” reminds Marcus Johnson of Blockchain Advisory Group. “The key is distinguishing between short-term volatility and fundamental shifts in the asset’s trajectory.”
As market participants await tomorrow’s inflation figures, the price action serves as a reminder that despite Bitcoin’s maturation as an asset class, it continues to exhibit sensitivity to macroeconomic conditions—a characteristic that offers both opportunities and challenges for investors navigating the evolving financial landscape of 2025.
