Cooling US inflation catches crypto bears off guard as short liquidations reach $179M

Cooling U.S. inflation triggered a broad risk-on move across financial markets on Tuesday, helping fuel a wave of crypto short liquidations as traders reacted to growing expectations that the Federal Reserve may have greater scope to ease monetary policy if inflation continues to moderate.

Over the past 12 hours, nearly $220 million in crypto positions were liquidated, with bearish traders accounting for more than 80% of the losses, according to CoinGlass data.

Crypto shorts bear the brunt of market rally

CoinGlass data showed total liquidations reached $219.77 million over the past 12 hours. This includes $179.26 million in short positions and $40.51 million in longs.

Ethereum recorded the largest liquidations at $98.73 million, followed by Bitcoin at $59.59 million, as both assets rallied after the inflation data.

Over the previous hour alone, short liquidations totalled $56.05 million, compared with $7.18 million in long liquidations, highlighting the extent of the squeeze.

The figures suggest that many traders who had positioned for lower prices were forced to close their positions as crypto markets moved higher following the macroeconomic release.

Softer CPI boosts appetite for risk assets

The move came after the U.S. Bureau of Labor Statistics reported that the Consumer Price Index [CPI] fell 0.4% in June. This marked the largest monthly decline since April 2020. 

Annual inflation slowed to 3.5%, while core inflation remained unchanged on a monthly basis and eased to 2.6% year over year.

The softer inflation reading weighed on the U.S. dollar and Treasury yields while supporting risk assets, including cryptocurrencies. 

Bitcoin traded higher following the release as investors interpreted the report as a sign that inflationary pressures may be easing, potentially giving the Federal Reserve greater flexibility over future interest rate decisions.

Although the 12-hour liquidation figures include activity before the CPI release, the dominance of short liquidations suggests the inflation report accelerated the upward move and forced bearish traders to unwind positions.

Ethereum leads short liquidation wave

Ethereum accounted for nearly half of all crypto liquidations during the period, exceeding Bitcoin despite the latter’s larger market capitalisation.

That may reflect stronger price momentum in ETH or heavier leveraged positioning ahead of the CPI release.

While Bitcoin also experienced substantial liquidations, ETH’s larger share highlights how macroeconomic events can have an outsized impact on leveraged positions across the broader crypto market.

Final Summary

• Crypto markets saw $219.77 million in liquidations over 12 hours, with short positions accounting for $179.26 million as traders reacted to cooling U.S. inflation.
• The softer CPI report boosted risk appetite, lifting Bitcoin and Ethereum, while triggering a wave of short liquidations led by Ethereum.