Just now, the U.S. January PPI data exploded.

The inflation alarm has sounded again, and global risk assets are plummeting. The Dow Jones has dropped over 700 points, Bitcoin once fell over 3.5% to reach the $65,000 mark, while gold, silver, and crude oil surged against the trend.

What exactly is the market trading? The sharp decline in the crypto market, is it really just due to inflation?

1. The truth about the data: Inflation is more stubborn than expected

First, let's take a look at the 'market-shocking' data released today (February 27) by the U.S. Bureau of Labor Statistics:

· Core PPI (excluding food and energy): increased by 0.8% month-on-month, which not only far exceeds December's 0.6%, but is also more than double the market expectation of 0.3%

· Overall PPI: up 0.5% month-on-month, also exceeding expectations, marking the largest increase since September last year.

· Year-on-year data: Core PPI rose to 3.6%, overall PPI rose to 2.9%, both significantly higher than the Federal Reserve's 2% inflation target.

What’s worse is that the main driver of inflation is service prices—up 0.8% month-on-month, the largest increase since July 2025. Among them, trade service prices surged by 2.5%.

What does this concept mean?

Inflation is neither 'temporary' nor 'cooling down.' It remains stubbornly standing there, mocking the market.

Two, chain reactions: From US stocks to crypto, who is swimming naked?

After the data was released, the market's bets on short-term interest rate cuts instantly cooled. The interest rate market generally believes that the Federal Reserve will remain inactive at least until summer.

The 'AI faith' in US stocks is being shaken.

The Dow Jones briefly fell 737 points, down 1.5%; the S&P 500 fell 0.8%; the Nasdaq fell 1%.

But the most interesting thing is not the index drop but that the market narrative is changing.

NVIDIA—the absolute leader in this AI frenzy—after delivering better-than-expected earnings, saw its stock price continuously decline. The market is transitioning from 'telling stories' to 'needing evidence.' Analysts pointed out that investors are beginning to worry about the sustainability of AI capital expenditures, and even about the risk of overcapacity.

When a market leader starts to falter, the following herd will naturally panic.

Crypto market: The 'fate of risk assets.'

Bitcoin fell about 3% today, retreating to around $65,000. The CoinDesk 20 index dropped about 2.3%, and mainstream tokens like Ethereum, XRP, and Solana weakened simultaneously.

Interestingly, the mining companies tied to AI narratives—IREN, Cipher Mining, Core Scientific, etc.—once plummeted by 6% to 8%. They are simultaneously bearing the dual blows of 'crypto price decline' and 'AI theme volatility.'

So, what is the direct reason for the decline in crypto?

It's simple: inflation exceeds expectations → interest rate cut expectations cool → risk appetite declines → funds flow out of high-risk assets.

Bitcoin's 'risk asset' attribute has been validated again. When macro uncertainty rises, the market's first reaction is always: sell high-volatility assets first and hold cash.

Three, but things are not that simple: the 'structural change' in crypto.

If you only look at today's ups and downs, you might miss something more important.

1. Institutional funds have become the core of pricing.

Today's analysis from the Economic Daily points out that the current crypto asset market has significantly increased its reliance on institutional funds, and the capital flow of Bitcoin spot ETFs is becoming a stronger pricing variable.

On February 6, $434 million flowed out of Bitcoin spot ETFs, putting pressure on the price. However, when on February 25, the ETF recorded a net inflow of $257.7 million, Bitcoin briefly rebounded above $69,000.

What does this mean?

Institutional funds are bringing the behavioral characteristics of traditional finance into the crypto market—when risk budgets contract, there will be more synchronous pressure to reduce positions and redeem.

2. Regulation is undergoing subtle changes.

It is worth noting that the Federal Reserve recently proposed to permanently remove 'reputational risk' from banking regulatory rules. This means that banks will no longer be able to 'punish or prohibit' crypto companies due to 'reputational risk.'

Wyoming Senator Lummis bluntly stated: This ends the 'Operation Choke Point 2.0' against the cryptocurrency industry.

In the long term, this is a significant positive—banks can cooperate with crypto companies more compliantly, and funding channels are expected to gradually open up. But in the short term, this positive is completely overshadowed by macro pressures.

Four, trend analysis: What is the market really waiting for?

What position is Bitcoin currently in?

· Price: Approximately $65,000 (as of press time), down about 48% from the historical high of $126,000 on October 12, 2025.

· Sentiment: The Crypto Fear & Greed Index remains in the 'Extreme Fear' range.

· Funds: Open interest contracts are cooling down, funding rates are stable, indicating that leverage has been cleared, and this round of decline is mainly driven by spot rather than long liquidation.

How do we view the short-term trend?

Multiple institutions have given cautious judgments:

· CryptoQuant believes that the true bear market bottom for Bitcoin may be around $55,000.

· Standard Chartered expects Ethereum may first drop to $1,400, and Bitcoin may fall to $50,000 before a real rebound.

· FxPro's chief analyst pointed out that Bitcoin is currently fluctuating between $62,000 and $70,000, approaching the lower bound.

What should we pay attention to next?

First, inflation data and Fed statements. As long as inflation does not back down, interest rate cuts will not come, and risk assets will struggle to have significant trends.

Second, ETF capital flows. Continuous outflow of funds puts pressure on prices; only when funds flow back in is there rebound momentum.

Third, progress in regulatory legislation. JPMorgan pointed out that if the US Congress passes market structure legislation such as the (Clarity Act) before mid-year, it will establish a comprehensive regulatory framework for digital assets, attracting more institutions to participate.

In conclusion

Today's market is actually telling a very simple story:

As long as inflation persists, interest rate cuts will not come, and risk assets will struggle to have significant trends.

Bitcoin falling towards $65,000 is not because the fundamentals of crypto have worsened, but because it is now the most sensitive nerve under the backdrop of global liquidity contraction.

But looking at it from another angle—leverage has been cleared, panic sentiment has peaked, and a long-term regulatory framework is being established. Every deep squat is for the next jump.

But this time, are you still at the table?