Cryptocurrencies have undergone significant corrections following their recent peaks.

Bitcoin, after breaking its historical high of $124,500 on August 14, has continued to decline. As of 15:30 on August 19, Bitcoin fell below $115,000, dropping nearly 3% within 24 hours. Ethereum dropped below $4,300, falling over 6% in the same period.

Overall, this cryptocurrency correction is primarily driven by the convergence of macroeconomic expectations and technical factors. On one hand, the US July Producer Price Index (PPI) surged 3.3% year-over-year (compared to an expected 2.5%), causing market expectations for a September Federal Reserve rate cut to drop from 98% to 84%, reducing the attractiveness of risk assets. On the other hand, both Bitcoin and Ethereum reached historical highs in August, prompting some investors to take profits. High-level profit-taking combined with leveraged liquidation chain reactions have further intensified the decline, creating a "step-wise" downward movement. Ethereum, influenced by both capital momentum and market sentiment, maintains high correlation with Bitcoin.

**Short-term Correction or Trend Reversal?**

As of 15:30 on August 19, Bitcoin fell below $115,000 to $114,700, dropping nearly 3% in 24 hours. Ethereum broke below $4,300 to $4,223.05, declining over 6% in the same period. Other cryptocurrencies also fell sharply, with Hyperliquid (HYPE) dropping over 9%, SUI falling over 8%, Cardano and Solana (SOL) declining over 6%, and BNB falling over 3%.

This cryptocurrency plunge resulted in significant liquidations. Data from analytics platform CoinGlass shows that over the past 24 hours, cryptocurrency contracts were liquidated for $332 million, affecting over 100,000 traders. Long positions accounted for $236 million in liquidations, while short positions totaled $95.53 million. The largest single liquidation occurred on Bitmex-XBTZ25, worth $7.825 million.

Deep cryptocurrency corrections are actually common. In mid-March 2020, global markets experienced a liquidity crisis with consecutive US stock market circuit breakers. Traders sold all risk assets to flow back to the dollar, causing Bitcoin to drop over 40% in two days and Ethereum to fall nearly 50%. During this period, massive leveraged long positions were automatically liquidated, further amplifying downward pressure. This marked the first time cryptocurrency markets truly experienced systematic shock from global financial markets.

In November 2022, cryptocurrency exchange FTX collapsed due to misappropriating customer assets, directly triggering a market confidence crisis. Bitcoin fell to approximately $15,000 intraday, plummeting 55%, while Ethereum dropped to about $1,100, falling 60%. Additionally, Tesla's suspension of Bitcoin payments in May 2021, the chain liquidations of Celsius and Three Arrows Capital in June 2022, and cryptocurrency ETF fund structure adjustments in early 2024 all previously triggered significant cryptocurrency corrections.

OKX Research Institute Senior Researcher Zhao Wei stated that overall, deep declines in Bitcoin and Ethereum are typically not caused by single negative factors, but rather by the interweaving of macroeconomic liquidity tightening, policy pressure, and industry credit risks. Under the combined effects of liquidity stress and on-chain leverage liquidations, prices experience dramatic volatility. From a longer-term and macroeconomic perspective, these fluctuations also reflect the cyclical characteristics of the cryptocurrency asset market, where periodic corrections and adjustments are part of trading market operations.

HashKey Group Chief Analyst Ding Zhaofei analyzed that historically, Bitcoin and Ethereum declines can generally be categorized into retracements within upward trends and market trend reversals. During retracements within upward trends, price declines are often triggered by market deleveraging. In market trend reversal phases, declines are more complex, typically accompanied by prolonged top-range formation and macroeconomic negative factors. Trend reversal characteristics include longer top-range periods, relatively slower decline pace, but deeper overall drops, usually accompanied by systematic changes in market sentiment and capital flows. In summary, retracements are primarily short-term adjustments within upward trends driven by deleveraging, while trend reversals are driven by macroeconomic environments and major industry events, often marking significant turning points in market cycles.

**Convergence of Macroeconomic Expectations and Technical Factors**

What factors are primarily driving this round of deep cryptocurrency corrections?

Gao Chengshi, Executive Committee Member of the China Computer Federation Blockchain Committee, pointed out two main reasons for the recent cryptocurrency correction: First, the US July Producer Price Index rose 3.3% year-over-year, suggesting increased inflation stickiness. Market expectations for a September Fed rate cut dropped from 98% to 84%, US Treasury yields rebounded, and risk asset attractiveness declined. Simultaneously, US Treasury Secretary Bessent explicitly ruled out plans to allocate Bitcoin using Treasury yields, breaking expectations of "sovereign fund entry." Second, profit-taking and technical corrections occurred as Bitcoin and Ethereum both reached historical highs in early August, prompting some investors to take profits at high levels, triggering stop-loss selling.

Ding Zhaofei stated that profit-taking is one of the important factors in the recent Bitcoin and Ethereum price corrections. Short-term markets accumulated significant profit-taking positions, with some investors choosing to realize gains at high levels, creating selling pressure. Meanwhile, as markets rose rapidly in earlier periods, leverage levels became relatively high. The correction phase accompanied deleveraging processes, further amplifying price volatility.

Ding Zhaofei noted that at the macro level, Federal Reserve rate cut expectations have weakened, and market expectations for liquidity easing have adjusted, somewhat suppressing risk appetite for crypto assets. Additionally, the market's absorption of previous positive policy signals has gradually weakened, with declining marginal effects also reducing upward price momentum. Overall, this round of decline more closely matches normal retracement characteristics within an upward trend, representing healthy market adjustment rather than trend reversal.

Zhao Wei also believes this cryptocurrency correction results from multiple overlapping factors. Macroeconomically, US July PPI data exceeded market expectations, causing traders to reduce bets on significant Fed rate cuts, pressuring risk assets and making market sentiment more cautious. Meanwhile, with the Jackson Hole Global Central Bank Annual Conference approaching, market repricing of the Fed's future policy path has increased short-term uncertainty.

"From capital and technical perspectives, Bitcoin faced resistance twice after reaching new highs, with bulls choosing to realize profits, triggering high-level profit-taking. Subsequently, large amounts of leveraged long positions were automatically liquidated, further amplifying downward volatility. At the same time, spot ETF net inflow pace slowed, with some trading days even showing net outflows, weakening marginal buying and reducing short-term price elasticity," Zhao Wei stated.