Why is the crypto down today?

The crypto market slid lower on July 16 as rising U.S. inflation data dampened expectations of a Federal Reserve rate cut, while some investors locked in profits following recent gains.

According to data from CoinGecko, the total crypto market capitalization fell to $3.78 trillion, down from around $3.91 trillion over the past 24 hours.

Bitcoin (BTC) dropped from around $120,000 yesterday to a low of $116,000 earlier today. Ethereum (ETH) also slid below the $3,000 mark, while XRP (XRP) fell 5% from $3.02 to $2.78.

Dogecoin (DOGE) took the biggest hit among major coins, tumbling 8%. Toncoin (TON), Litecoin (LTC), and Bittensor (TAO) also registered substantial losses over the past day.

Nearly $549.3 million in cryptocurrency positions were liquidated in the last day, according to Coinglass data, most of which came from long positions, leading to downward pressure in the broader crypto market.

The market reaction followed as traders focused on the latest escalation of U.S. tariffs, while the June consumer inflation report showed the first signs of tariff-driven inflation.

The Consumer Price Index rose 2.7% on an annual basis and 0.3% month over month, the sharpest gain in five months. Both figures reflected accelerated inflation, likely driven by U.S. tariffs on major trading partners.

The most recent threat came directly from President Trump, who warned that the U.S. would enforce 100% secondary tariffs on any country continuing to trade with Russia if no peace deal is reached between Russia and Ukraine within the next 50 days.

As a result, expectations for a Federal Reserve rate cut in July have cooled. Analysts now anticipate the Fed will hold rates steady, with a possible cut delayed until September.

Some experts argue that while the Fed should consider rate cuts, it must avoid taking extreme measures. In a note to crypto.news, Maksym Sakharov, CEO of decentralized on-chain bank WeFi, said the Fed should take cues from the UK.

“The Fed needs to follow the footsteps of the UK,” Sakharov said, “but not as Trump expects.”

“President Donald Trump has called for a dramatic rate cut down to 1%, from the current 4.5%. While this is an ambitious plan for spenders, it could deeply hurt savers. I’m not saying the U.S. shouldn’t cut interest rates. It should, but in a very controlled manner,” he added.

However, he cautioned that slashing rates too aggressively could drive investors into high-risk assets and destabilise markets.

According to CME Group’s FedWatch Tool, the probability of a September rate cut has also slipped to 52.5%, down from over 80% just a week ago.

Historically, higher interest rates reduce the appeal of risk assets such as cryptocurrencies by tightening liquidity conditions, while cuts boost liquidity.

The downturn strengthened further as traders started locking in their profits after Bitcoin raced past $123,000 to an all-time high of $123,091 on Monday.

Typically, long-term investors offload their holdings at market highs, and this time, expectations of a hawkish Fed rate decision may have also influenced their decision to sell. Glassnode data shows that investors who held BTC for over 5 months made up for 56% of the total profit-taking, locking in gains of approximately $1.96 billion.

Finally, technical indicators also point to overextension. The crypto market’s Relative Strength Index currently sits at 73, which signals it’s overbought and could be due for a more short-term dip or some sideways movement ahead.