Bitcoin experienced another sharp bout of volatility following the release of softer-than-expected U.S. inflation data, with rapid price swings once again triggering more than $500 million in liquidations across the crypto market. What initially appeared to be a bullish macro signal quickly turned into a brutal reversal, underscoring how fragile sentiment remains as leverage stays elevated.
Headline and core consumer price index figures came in below forecasts, at 2.7% and 2.6% respectively, easing concerns about persistent inflation and briefly lifting risk appetite. Bitcoin reacted swiftly, climbing toward the $90,000 level and raising hopes of a sustained rebound. However, the optimism proved short-lived. Within hours, selling pressure resurfaced and erased most of the gains, catching leveraged traders on the wrong side of the move.
Data from CoinGlass shows that total crypto liquidations reached roughly $575 million over the past 24 hours, with long positions accounting for the bulk of the damage. Bitcoin alone was responsible for around $202 million of those liquidations, including $119 million from bullish bets. The speed of the reversal highlights how crowded long positioning had become after the initial CPI-driven bounce.
On-chain and derivatives data suggest that this episode differed from earlier sell-offs. While previous declines were largely attributed to spot market selling, the latest downturn appears to have been driven by derivatives traders locking in profits. According to Velo data, futures and options activity played a central role in driving prices lower, intensifying the move as stop-losses and margin calls cascaded through the market.
Despite the turbulence, Bitcoin has shown resilience around key support levels. The $85,000 to $81,000 zone has continued to attract buyers, helping stabilise prices after the liquidation wave. At the time of writing, Bitcoin was trading near $88,000, modestly higher on the day, suggesting that demand has not fully evaporated.
Broader macroeconomic forces are also complicating the outlook. The Bank of Japan’s decision to raise interest rates by 25 basis points marked the end of a three-decade era of ultra-low rates. This historic shift threatens the long-standing yen carry trade, which has provided abundant liquidity to global markets. As that trade unwinds, risk assets—including cryptocurrencies—could face sustained headwinds as liquidity conditions tighten.
Leverage remains a defining feature of the current crypto environment. December alone has seen multiple sessions where total liquidations exceeded $500 million, with bullish positions contributing disproportionately. With the holiday period approaching, thinner liquidity and portfolio rebalancing could amplify price swings even further.
Although some traders remain optimistic about Bitcoin’s medium-term prospects, recent price action highlights the growing influence of macro shocks and derivatives positioning. In the near term, heightened volatility appears likely as markets grapple with shifting global monetary conditions and an increasingly cautious risk backdrop.
