Bitcoin fell below $85,000 on September 23 after stronger-than-expected US business activity sent Treasury yields higher and forced liquidation of leveraged long positions.
The decline reversed momentum from a rebound that had accelerated earlier in the week as Bitcoin pushed through a concentration of short positions. S&P Global's September flash purchasing managers' indexes triggered the selloff. Within an hour of the release, $135.8 million of crypto positions were liquidated, with longs accounting for $125.9 million. Bitcoin accounted for $47.4 million of liquidations and Ether $23.9 million.
Over the preceding 24 hours, total losses reached $510 million across 122,256 traders, with long traders losing $363.83 million.
Economic Data Shifts Market Sentiment
S&P Global's composite PMI climbed to 58.4 in September, its highest level in more than five years. The services index rose to 58.7 and manufacturing reached 57, all above expectations. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey was consistent with annualized economic growth of about 5%, with roughly 4% growth signaled for the third quarter.
The economic acceleration came with concerning inflation signals. Companies reported the steepest increase in input costs in four years as higher oil prices lifted fuel and transportation expenses, while supply-chain bottlenecks worsened and backlogs increased. Williamson noted that the combination of stronger demand and limited capacity was giving companies greater pricing power, raising the risk that cost increases feed into inflation.
Treasury Yields Rise Sharply
Bond markets responded immediately to the data. The 10-year Treasury yield moved back above 5% to around levels last seen in 2007, while the two-year yield climbed to its highest level in about 27 months. The move revived broader concerns over how much additional yield investors may demand to absorb growing US government borrowing.
James Lavish, Co-Managing Partner of Bitcoin Opportunity Fund, argued that Treasury supply is increasingly colliding with investor concerns over structural dollar debasement. He suggested that higher yields can become self-reinforcing as rising interest costs increase the government's financing needs, requiring still more debt issuance.
Headwinds for Bitcoin Recovery
Much of the bearish positioning that had helped propel Bitcoin's latest advance had already been cleared. The push through $86,000 earlier in the week forced shorts to cover and helped accelerate Bitcoin toward $87,000. Wednesday's move removed that tailwind just as the bond market turned more hostile to risk assets.
Bitcoin now increasingly depends on fresh spot demand to reclaim $85,000, with Treasury yields above 5% and US growth still surprising to the upside. Buyers must support the rebound without the short-covering boost that drove the earlier advance.
