Bitcoin’s remarkable surge to fresh record highs ended abruptly on Thursday, sending ripples through the crypto market. The world’s largest digital asset had surged past $124,000 for the first time earlier this week, igniting optimism among traders. However, the bullish momentum was halted following the release of unexpectedly high US wholesale inflation figures, which dented investor sentiment and prompted heavy profit-taking.

At the time of writing, Bitcoin has slipped 1.72% to $118,243, with 24-hour trading volumes reaching $108.89 billion, according to CoinMarketCap. Ether (ETH), the second-largest cryptocurrency, also succumbed to selling pressure, falling 2% to $4,591.40 after flirting with the $4,800 mark, just shy of its all-time high from 2021.

From CPI Boost to PPI Blow

The rally initially gained steam on Tuesday after a softer US consumer inflation report bolstered expectations that the Federal Reserve might cut interest rates as early as September. This optimism spilled over into equities, pushing the S&P 500 and Nasdaq to new records alongside Bitcoin and Ether.

However, Thursday’s wholesale inflation data painted a different picture. The higher-than-expected Producer Price Index (PPI) figures raised fresh concerns that the Fed may be less inclined to move towards monetary easing in the near term. The shift in macroeconomic sentiment triggered a rapid unwinding of leveraged positions, hitting the crypto market hard.

Technical Indicators Signal Weakness

On the charts, Bitcoin’s strong upward trajectory began to falter after peaking near $121,000 on 13 August. According to TradingView data, the cryptocurrency broke below its upward trendline and fell under the 50-period moving average on the four-hour chart, signalling waning bullish momentum.

While the 50-day moving average remains above the 200-day moving average, a sign of lingering medium-term optimism, the current drop suggests sellers have regained control in the short term. The widening gap between Bitcoin’s current price and its 50-day average also points towards potential volatility in the sessions ahead.

The technical weakness was mirrored in liquidation data from Coinglass, which revealed that over $1 billion in crypto positions were wiped out in just 24 hours. Long positions bore the brunt, losing $782 million and impacting more than 219,000 traders. The single largest liquidation was recorded on Bybit’s BTCUSD contract, totalling a staggering $10 million.

Institutional Interest Keeps Medium-Term Outlook Positive

Despite the sharp pullback, analysts note that medium-term sentiment remains buoyed by strong institutional demand and ongoing adoption trends. Large-scale investment vehicles, corporate treasury allocations, and the continued integration of Bitcoin into payment networks all support the view that the long-term trajectory is still upward.

However, in the immediate future, traders may need to brace for further choppiness. With macroeconomic data continuing to influence risk assets, any new inflation or interest rate signals could spark fresh volatility.

For now, Bitcoin’s latest reversal serves as a reminder that even in the midst of record highs, the cryptocurrency market remains sensitive to macroeconomic shocks. While the broader uptrend may still be intact, the road ahead appears set for turbulence, a scenario seasoned traders know all too well.