On September 23, Bitcoin experienced a sharp price decline, falling below the $85,000 threshold as US Treasury bond yields climbed in response to stronger-than-expected business activity data. The digital asset had previously staged a rapid rebound by overpowering heavy short seller pressure, but this momentum quickly collapsed in the face of macroeconomic headwinds, shifting market sentiment from bullish to bearish and forcing leveraged investors into large-scale position unwinding, resulting in a significant price reversal.

The September PMI data released by S&P Global (SPGI.US) served as the direct trigger for the intensified selloff. According to Woofun AI's compiled data, within the hour following the data release, total liquidations across the cryptocurrency market reached $135.8 million, with long positions accounting for approximately $125.9 million of that total. At the asset level, Bitcoin-related liquidations amounted to $47.4 million, while Ethereum saw $23.9 million in liquidations. Extending the window to a full 24 hours, a total of 122,256 traders suffered losses, with aggregate losses reaching $510 million, of which long traders lost $363.83 million.

This dramatic market reaction reflects the intense conflict between investors' prior expectations of sustained price appreciation and the rapidly deteriorating interest rate environment. The latest economic data shows that corporate cost pressures are rising again, while US economic growth is accelerating, providing fundamental support for maintaining elevated interest rates. Chris Williamson, Chief Business Economist at S&P Global's (SPGI.US) Market Intelligence division, noted that the current survey data corresponds to an annualized economic growth rate of approximately 5%, with third-quarter overall growth likely to come in around 4%.

However, accompanying the growth acceleration are less encouraging inflation signals: rising oil prices have driven significant increases in energy and transportation costs, compounded by increasingly severe supply chain bottlenecks and a buildup of backlogged orders, marking the most severe input cost escalation in four years. Williamson emphasized that strong demand combined with limited production capacity has granted companies greater pricing power, increasing the risk of cost-push inflation in the coming months. He added that even excluding pandemic-related factors, this represents the most severe supply chain bottleneck situation in nearly two decades of survey records, with businesses also facing hiring difficulties and a sharp rise in unfinished order volumes. While the order backlog bodes well for future production expansion, it also implies stronger pricing power for companies, which poses a threat to the inflation outlook.

The bond market reacted instantly to these developments: the 10-year US Treasury yield climbed back above 5%, reaching levels not seen since around 2007, while the 2-year yield rose to its highest point in approximately 27 months. This move has sparked broader concerns that investors may demand higher yields to compensate for the US government's growing borrowing needs. James Lavish, Co-Managing Partner of the Bitcoin Opportunity Fund, provided an in-depth analysis from the perspective of structural debt risk. He argued that the scale of US Treasury debt issuance is increasingly clashing with investor concerns over the structural devaluation of the dollar. As interest costs rise, government financing needs increase, requiring additional debt issuance, which in turn creates a self-reinforcing effect of higher yields.

Lavish noted that any monetary intervention aimed at absorbing debt supply could further exacerbate currency depreciation concerns, forming what he describes as a "self-reinforcing cycle." This structural analysis compounds the immediate message from Wednesday's PMI report: economic growth is faster than expected, providing the Federal Reserve with greater latitude to maintain its restrictive policy stance, while rising input costs and oil prices make the inflation picture increasingly complicated. For Bitcoin, the current situation is particularly challenging because many of the short positions that had previously driven price increases have already been cleared out. Earlier this week, Bitcoin's price broke above $86,000, forcing short sellers to cover their positions and subsequently pushing the price toward $87,000. However, Wednesday's price action eliminated this positive catalyst, while the bond market has turned increasingly negative toward risk assets.

As a result, Bitcoin's path back to the $85,000 level now depends increasingly on fresh spot demand. With Treasury yields above 5% and US economic growth still exceeding expectations, buyers must now support any price rebound on their own, without the tailwind previously provided by short covering.