This week, the cryptocurrency market experienced a dramatic turn. The Consumer Price Index (CPI) data released on Tuesday initially showed a moderation in inflation, sparking optimism in the market. However, the Producer Price Index (PPI) data released on Thursday poured a bucket of cold water on the market.

PPI increased by 0.9% month-on-month, far exceeding expectations and marking the largest increase in three years. In particular, the significant rise in service sector costs has raised concerns about inflation potentially spreading from the production side to the consumption side.

This data directly affects the market's expectations for the Federal Reserve's interest rate cut in September. The likelihood of a significant rate cut, which was originally regarded as almost certain, has sharply decreased, replaced by expectations of a slight adjustment to the interest rate. To make matters worse, Federal Reserve official Musalem stated that the current economic conditions do not support an aggressive rate cut policy.

The sharp shift in policy expectations has led to a significant correction in the encryption currency market. Bitcoin quickly fell from above $124,000, with intraday losses exceeding 4% at one point. Other major encryption currencies such as Ethereum, SUI, and SOL also declined, causing market sentiment to suddenly turn cold.

This extreme volatility serves as a reminder to investors that in the current environment where data and policies are changing rapidly, the speed of market response is crucial. For investors participating in contract trading, setting stop-losses and controlling positions is particularly important to avoid significant losses.

Despite the pressure the market may face in the short term, the current price level may provide an opportunity for long-term investors to accumulate positions gradually. However, regardless of the strategy taken, cautiously controlling risk remains a key principle in cryptocurrency investment.

In this uncertain market environment, investors need to remain vigilant, closely monitor economic data and policy changes, and adjust their investment strategies accordingly.