The crypto market crashed on Thursday even as the US published an encouraging inflation report. Bitcoin dumped to $85,300, while top tokens like MYX Finance, PUMP, Pudgy Penguins, and Hyperliquid fell by over 10%. As a result, the market cap of all tokens dropped to $2.87 2 trillion.
Crypto Market Crash Happened After the Inflation Report
Bitcoin and most altcoins dropped after the US published the latest inflation report on Thursday. This drop was bizarre as it happened on the same day that the US equities market rebounded, with the Dow Jones, S&P 500, and Nasdaq 100 indices rising by 65, 53, and 315, respectively. The closely-watched VIX Index dropped by 4.28%.
The inflation report showed that the headline Consumer Price Index (CPI) dropped from 3.1% in October to 2.7% in November. Similarly, the core CPI figure moved from 3.0% to 2.6% in the same period, the biggest decline in months.
Most importantly, there is a likelihood that US inflation will keep going downwards now that the crude oil price has tumbled. Brent and WTI benchmarks have all dropped to $58 and $55, their lowest levels in years, while gasoline is at its lowest point in four years.
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In theory, these numbers should have boosted the crypto market because they came two days after the US published a weak labor report. The report showed that the unemployment rate rose to a multi-year high of 4.6%.
Therefore, these numbers mean that the Fed will cut interest rates more times than it hinted last week. In its meeting, the bank noted that it would cut rates just one more time. Polymarket traders, on the other hand, expect the bank to cut rates three times.
Odds of more cuts have risen as Donald Trump confirmed that he would nominate a Fed Chair who will support cuttting “by a lot”. Indeed, Stephen Miran, who he appointed to the Fed, has supported 0.50% cuts in all the recent meetings.
Crypto Analysts Point to Manipulation Ahead of BoJ Meeting
There are potentially three main catalysts for the crypto market crash after the US inflation report. First, the decline happened because of wariness among investors about the Bank of Japan (BoJ), which is expected to hike interest rates to a multi-decade high. Historically, Bitcoin and other altcoins have dumped tokens after the BoJ hikes rates.
Second, there are concerns that Chinese Bitcoin miners are dumping thousands of Bitcoins to the market. This is happening as Chinese authorities continue their crackdown on the industry. This is crucial as China controls the Bitcoin mining industry even though the government banned the coin in 2020.
Finally, crypto analysts point to manipulation by large companies like Binance, Winttermute, Coinbase, Fidelity, and Bitstamp. Binance sold 7,106 coins, while Wintermute, Coinbase, Fidelity, and Bitstamp sold over 6,400 coins all at once.
All these companies, especially Binance and Wintermute, have been accused of manipulating the industry. Indeed, some analysts believe that their actions led to the huge liquidation event in October.
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