Bitcoin briefly slumped below $80,000 on Tuesday as global markets reacted to President Trump's renewed warning that the U.S.-Iran ceasefire agreement is in jeopardy, coupled with hotter-than-expected U.S. inflation data.
Geopolitical Tensions and Sticky Inflation Squeeze Risk Assets
On May 12, Trump told reporters that Iran's latest proposal was “unacceptable” and cautioned that the ceasefire deal is “hanging by a thread.” The comments reignited fears of a return to full-scale military action, which would likely keep the Strait of Hormuz largely shut — a scenario that Saudi Aramco’s CEO warned could prevent oil markets from stabilizing until at least 2027. Oil prices spiked on the news, further fueling inflation concerns.
Bitcoin, which had briefly touched $82,000 earlier on Monday, showed signs of exhaustion and fell sharply. By early Tuesday morning Eastern Time, it dipped to an intraday low of $79,820 before recovering to around $80,500. The 24-hour decline of approximately 1.6% reduced the cryptocurrency’s market capitalization to $1.61 trillion.
The sell-off was amplified by the release of the U.S. Consumer Price Index (CPI) for April, which came in at 3.8% year-over-year — above the 3.7% consensus estimate and the highest reading in six months. Energy prices, particularly gasoline, were the primary driver. The data effectively dashed any lingering hopes for a Federal Reserve rate cut in the near future, strengthening the U.S. dollar and weighing on all risk assets, including cryptocurrencies.
$232 Million in Long Positions Wiped Out
The combination of geopolitical uncertainty and hawkish macro data triggered a cascade of forced liquidations across the crypto market. According to Coinglass, nearly $280 million in leveraged positions were wiped out in the past 24 hours. Long positions accounted for the vast majority — approximately $232 million — while short liquidations totaled just $7.5 million. Bitcoin-specific liquidations reached $57 million, mostly longs.
The high leverage buildup from the prior week’s rally left the market vulnerable to a sudden reversal. With the world’s largest digital asset now hovering around the psychologically important $80,000 level, traders are watching whether bulls can defend that support. A decisive break below could open the door to $78,000 or lower.
Producer Price Index Next in Focus
Attention now shifts to the Producer Price Index (PPI) report scheduled for release on May 13. If the data shows that upstream price pressures continue to build, it would reinforce the narrative that inflation is becoming more entrenched, giving the Fed little room to ease policy even as the economy shows signs of cooling.
Meanwhile, the U.S.-Iran standoff remains fluid. With midterm elections looming later this year, Trump faces a difficult political calculus: renewed military intervention could secure energy supplies but risks driving oil prices even higher, hurting American consumers. Any escalation in the Middle East is likely to keep volatility elevated for both traditional and crypto markets.
Analysts note that Bitcoin’s correlation with equities and commodities has strengthened recently, making it increasingly sensitive to macro shocks. Until there is clarity on both inflation trends and geopolitical risks, the crypto market may remain under pressure.