On Sept. 23, Bitcoin dropped beneath the $85,000 threshold after robust U.S. business activity data pushed Treasury yields upward and cleared out leveraged long positions.
This market reversal halted the upward momentum that had recently accelerated as Bitcoin broke through a heavy concentration of short positions earlier in the week.
Selling pressure intensified following the release of S&P Global’s September flash purchasing managers’ indexes. CoinGlass data indicates that $135.8 million in crypto positions were liquidated within an hour, with long positions responsible for $125.9 million of that total. Bitcoin liquidations totaled $47.4 million, while Ether accounted for an additional $23.9 million.
Over a 24-hour window, total losses reached $510 million across 122,256 traders, with long traders suffering $363.83 million in losses.
The market reaction highlighted how swiftly the interest rate environment shifted against traders who were positioned for further gains. Recent economic indicators revealed that U.S. economic growth is accelerating as companies experience renewed cost pressures, reinforcing expectations that interest rates will stay high.
Hot US growth sends Treasury yields above 5%
S&P Global’s composite PMI rose to 58.4 in September, marking its highest reading in over five years. Meanwhile, the services index increased to 58.7 and the manufacturing index reached 57, with all three metrics exceeding forecasts.
According to Chris Williamson, chief business economist at S&P Global Market Intelligence, historical patterns indicate the survey aligns with an annualized economic growth rate of roughly 5%, pointing toward about 4% growth for the third quarter overall.
This growth came alongside an inflation signal that was less than ideal. Businesses highlighted the sharpest rise in input costs in four years, driven by higher oil prices that increased fuel and freight expenses, alongside worsening supply-chain disruptions and growing order backlogs.
Williamson noted that the mix of stronger demand and constrained capacity gave businesses increased pricing leverage, elevating the danger that rising costs could fuel broader inflation in upcoming months.
He added:
“This growth is being accompanied by some of the most severe supply chain bottlenecks seen in the near-two-decade survey history if the pandemic is excluded, with companies also reporting increasing problems finding suitable staff. Backlogs of work are consequently rising sharply. While this accumulation of uncompleted orders bodes well for the further expansion of output and capacity in the coming months, it also indicates that companies are developing more pricing power, and hence is a worry for the inflation outlook”
Bond markets reacted instantly. The 10-year Treasury yield climbed back above 5%, hitting levels not seen since 2007, while the two-year yield reached its highest point in roughly 27 months.
This movement also rekindled broader worries regarding the extra yield investors might demand to absorb expanding U.S. government debt issuance.
James Lavish, Co-Managing Partner of the Bitcoin Opportunity Fund, asserted that Treasury supply is increasingly clashing with investor anxieties surrounding what he termed structural dollar debasement. From his perspective, higher yields can become self-reinforcing because rising borrowing costs expand government financing demands, which in turn necessitates further debt creation.
Lavish further noted that any future monetary intervention designed to absorb that supply could worsen currency worries, resulting in what he characterized as a “self-reinforcing loop.”
This structural viewpoint compounds the immediate takeaway from Wednesday’s PMI release. An economy expanding faster than anticipated provides the Federal Reserve with more leeway to maintain restrictive monetary policies, while escalating input costs and higher oil prices complicate the broader inflation trajectory.
The timing presents a significant hurdle for Bitcoin, particularly because much of the bearish positioning that fueled its recent rally had already been exhausted.
Earlier in the week, the push past $86,000 forced short sellers to cover their positions, helping propel Bitcoin toward $87,000. Wednesday’s downturn stripped away that tailwind right as the bond market turned more hostile toward risk-on assets.
Consequently, Bitcoin relies increasingly on organic spot demand to reclaim the $85,000 level. With Treasury yields remaining above 5% and U.S. economic growth continuing to outperform expectations, buyers must now sustain the recovery without the assistance of the short-covering momentum that bolstered the prior rally.
Frequently Asked Questions
Why did Bitcoin fall below $85,000?
Bitcoin dropped below $85,000 after stronger-than-expected U.S. business activity data drove Treasury yields higher and triggered a massive wipeout of leveraged long positions.
How much was liquidated in the crypto market?
Within an hour of the S&P Global PMI release, $135.8 million in crypto positions were liquidated, with long positions accounting for $125.9 million of that total.
What happened to Treasury yields?
The 10-year Treasury yield climbed back above 5% to levels not seen since 2007, and the two-year yield reached its highest point in about 27 months.
What did the S&P Global PMI report reveal?
The composite PMI rose to 58.4 in September—its highest level in over five years—signaling annualized economic growth of about 5% alongside a sharp four-year high in input costs and worsening supply-chain bottlenecks.
