A sudden dip in the US Consumer Price Index (CPI) sent shockwaves through the crypto market, triggering a staggering liquidation surge. In just one hour after the inflation data was released, short positions worth $134 million were wiped out, marking the largest monthly decline since 2020. The CPI unexpectedly dropped by 0.4% in June, bringing the annual inflation rate down to 3.5% and core inflation to 2.6%.
This significant inflation decrease prompted a dramatic shift in market sentiment. The chances of a Federal Reserve interest rate hike plummeted to just 8%, while US stock market futures gained momentum. Traders who had anticipated further declines in crypto were caught off guard, leading to a rapid series of liquidations.
The Ethereum Effect
According to data from CoinGlass, the liquidations skewed heavily towards short positions, with a remarkable 1,810% imbalance recorded within the first hour. Short sellers faced forced closures at a rate 19.1 times higher than those holding long positions. Interestingly, Ethereum took the hardest hit during this short squeeze. Short sellers of ETH lost $56.71 million, while Bitcoin liquidations amounted to $41.14 million.
This trend was underscored by a notable incident on Binance, where a single ETHUSDT position worth $6.37 million was liquidated, the largest of the past 24 hours. In total, 89,498 traders were liquidated over the day, collectively losing $413.37 million.
With inflation rates falling below 4%, the implications for the Federal Reserve's monetary policy are significant, possibly paving the way for interest rate cuts in the near future. As traders recalibrate their strategies, the impact on the cryptocurrency landscape remains to be seen.
This article is for informational purposes and does not constitute financial advice.
