Fed Rate Hike Alarm. PCE Bloodbaths Crypto Market, BTC Price Drops Below 59,000, Triggering Another Bull Massacre

TradingKey - US May PCE data strengthens rate hike expectations, with Bitcoin's price hitting a new low since yesterday, closing in on $58,000.

On June 25, Eastern Time, following the release of the US May PCE data, Bitcoin ( BTC) fell below the $59,000 threshold, hitting a low of $58,121 and once again breaking the two-year low set yesterday. Currently, the price of Bitcoin has recovered to above $59,000, temporarily trading at $59,550.

Bitcoin price chart, Source: TradingView

The plunge in Bitcoin's price and the broader cryptocurrency market has once again dealt a heavy blow to bulls. In the past 24 hours, over 130,000 traders in the crypto market were liquidated, with the total amount approaching $900 million, a slight decrease from yesterday. On June 24, over 170,000 traders were liquidated, totaling about $1 billion,

The core reason behind this PCE-data-driven 'bull massacre' lies in the renewed escalation of macro tightening expectations. The latest data shows that the headline PCE year-on-year growth rate surged to 4.1%, marking the highest point since April 2023. Meanwhile, the core PCE year-on-year growth rate (excluding food and energy) reached 3.4%, also hitting a new high since October 2023.

Although the month-on-month growth rate (0.4%) met or was even slightly below the market's worst-case expectations, the high year-on-year inflation rate of 4.1% shattered any short-term optimistic illusions in the market. Institutional economists, such as those at BMO Capital Markets, stated bluntly: 'Sticky core services inflation will force the Federal Reserve to keep interest rates high and even keep potential rate hikes on the table.'

The hawkish stance of the newly appointed Federal Reserve Chairman, Kevin Warsh, has inadvertently amplified the impact of this data. At the June Federal Open Market Committee (FOMC) meeting, the Fed had already removed hints of future rate cuts, shifting instead to signal a possible additional rate hike. What further unnerves Wall Street is Warsh's inclination to abandon forward guidance, advocating for data-dependent actions over words. This means the market has lost the policy guardrails it was accustomed to; as soon as inflation data runs hot, capital will immediately price in a rate hike in panic.

In addition, Bitcoin's price decline is influenced by another factor. With the transition period for Europe's MiCA regulations set to end on July 1, compliant capital chose to take profits and prioritize cash at the end of the quarter to avoid policy uncertainty. This acted as an invisible driver behind the market's current vulnerability.

Currently, the market sentiment index stands at 15, indicating a state of extreme fear, while bearish voices continue to rise. Among them, Jiang Zhuoer, founder of Lebit Mining Pool, projects Bitcoin to fall to $42,000–$44,000. However, these may just be market noise and not necessarily reflect the actual reality.

Looking ahead, investors should closely monitor the Non-Farm Payrolls (NFP) data scheduled for release on July 2, as well as the FOMC meeting minutes on July 8. These will clarify the true stance of the Warsh-led Fed toward this '4.1% PCE' reading and outline future policy directions. If a strongly hawkish stance is maintained, Bitcoin will likely head toward $50,000; if dovish signals are released, Bitcoin's price will rebound sharply, though the upside will be limited, with $80,000 acting as the ceiling.