Crypto Markets Plunge on Risk-Off Ahead of U.S. PCE Data
Crypto markets plunged as risk-off sentiment gripped investors ahead of the U.S. core PCE inflation report. The CoinDesk 20 Index fell 5% in 24 hours, led by declines in BTC and ETH. Futures markets saw capital outflows and rising demand for put options on Bitcoin and Ether, signaling heightened protective positioning. Derivatives data show falling open interest in BTC and ETH futures on both centralized exchanges and Deribit, while smaller tokens like KAS and KCS saw OI gains. On-chain activity included a surge in perpetuals volume, with Aster DEX at $46 billion versus Hyperliquid’s $17 billion. Meanwhile, Plasma launched its mainnet beta and XPL token, achieving a $12 billion fully diluted valuation and over $2 billion in circulating supply, backed by Bitfinex, Bybit, Paolo Ardoino and Peter Thiel. With U.S. core PCE due Friday, elevated volatility and further downside remain likely until inflation prints align with expectations.
Bearish
The sharp sell-off reflects heightened risk aversion ahead of a key U.S. inflation report. Historically, crypto markets have tumbled when Fed’s preferred measures hinted at persistent inflation, prompting rate-tightening bets. The surge in put options and falling futures open interest in BTC and ETH indicate traders hedging against further declines. Similar patterns emerged in early 2023, when CPI surprises triggered a 10% Bitcoin correction. Short-term, the U.S. core PCE print could drive volatile price swings and deepen outflows if inflation surprises on the upside. In the long run, a softer-than-expected reading may reverse some losses, but the current risk-off tone suggests downward pressure until clear signs of disinflation emerge. Overall, traders should brace for continued volatility and consider protective strategies amid uncertainty around monetary policy and macroeconomic data.