Why is Crypto Down Today: When Rate Cut Expectations Aren't Enough

Cryptocurrencies took an unexpected downturn today, as the market erased close to $200 billion in market capitalization this afternoon. 

This reversal took place a few hours after today's PCE inflation report, which caught many investors off guard. Today's report revealed that Core PCE inflation grew in line with expectations, reinforcing the idea that the Fed will cut interest rates one final time at December's FOMC meeting. 

So... what gives? 

More than just inflation reports, today's market move can be explained by a sudden influx of selling pressure from the institutional side, catching over-leveraged traders with their pants down.

Institutional Outflows Weighing In

Wednesday saw the day with the most outflows in the Spot Bitcoin ETF market since November 20. In total, funds sold nearly $200 million in Bitcoin, underscoring the scale of institutional selling pressure. BlackRock alone registered over $112 million in outflows, indicating that the ETF market is limiting its Bitcoin exposure for the time being. 

source: SoSoValue

Altcoin ETFs also experienced some setbacks. Ethereum ETFs saw over $50 million in outflows on December 4th, while Solana ETFs registered the highest amount of redemptions in a single day -- $32 million -- on Tuesday. 

Crypto Liquidations Surge

The market reversal once again caught late bulls red-handed. Almost half a billion dollars got liquidated from the market today, signaling that once again, leverage remains the Achilles’ heel of crypto traders.

source: Coinglass

In total, 134,259 traders were liquidated today, with the majority of forced exits being from long positions. 

Bitcoin Slips Below $90k

The market-leading cryptocurrency fell below its $90,000 resistance today -- erasing most of the profits seen throughout the week. The currency is currently trading at $89,391 on the Coinbase exchange with a 3.5% decrease in the day. 

As a result, Bitcoin also left the $92k - $94k channel, where it looked like an accumulation zone for future breakout attempts. 

This sharp correction reveals that, while the market has seen some momentum in the last few days, conditions remain fragile.  Historically trading in line with U.S. stocks, Bitcoin has recently diverged from the S&P 500, signaling that market uncertainty is weighing on crypto more than other speculative assets. 

Where the market moves next is anyone's guess. However, more liquidation data may indicate another test above $90K soon. 

Bitcoin has a $49 million liquidation pool sitting just above that zone, precisely at $90,013. This indicates that price may revisit that zone to trigger short liquidations and fuel an upward squeeze.

But nothing so far really explains why crypto is down today. Beyond crypto, bond markets added another layer of complexity.

Rate Cuts and High Yields?

U.S. 10-Year Treasury Yields rose 4% today, to their highest point since November 14. Moreover, 10Y yields saw their highest weekly surge since June.

Typically, yields rise when investors demand higher returns to offset inflation. Meanwhile, interest rate cut expectations remain sky-high, so... what gives?

Despite today's PCE showing that inflation grew as expected, Headline PCE inflation remains elevated, with September’s report marking the highest level since 2023.

The divergence between rate cut expectations and rising yields implies that bond investors see limited room for future cuts, and that long-term inflation, fiscal deficits, and supply pressures may keep borrowing costs elevated for longer in 2026, regardless of short-term Fed easing.