The latest U.S. inflation report triggered a massive short squeeze in cryptocurrency markets, with short liquidations outpacing longs by a staggering 1,810% in the first hour. According to CoinGlass, short sellers lost $134.90 million compared to just $7.06 million for longs, as the Consumer Price Index (CPI) fell 0.4% in June—its steepest monthly decline since April 2020. Annual inflation slowed to 3.5%, while core inflation dropped to 2.6%, prompting the probability of a Federal Reserve rate hike to collapse to just 8%.
Ethereum Takes the Hardest Hit
Contrary to expectations, Ethereum bore the brunt of the squeeze. In the first hour alone, ETH short liquidations reached $56.71 million, surpassing Bitcoin's $41.14 million. The largest single liquidation of the past 24 hours was a $6.37 million ETHUSDT position on Binance. Overall, the market liquidated 89,498 traders over the past day, with total losses amounting to $413.37 million.
The unusual skew toward Ethereum reflects a buildup of bearish bets on the second-largest cryptocurrency, which were abruptly unwound as inflation data surprised to the downside. The imbalance between short and long liquidations—19.1 times more shorts than longs—underscores the violence of the move.
Implications for Fed Policy and Crypto
With inflation falling below 4%, the Federal Reserve now has room to begin cutting interest rates as early as this autumn. For the crypto market, this signals a potential influx of liquidity, as digital assets tend to react first to expectations of cheaper money. The wave of short liquidations has weakened bearish momentum, establishing new medium-term support levels for Bitcoin and Ethereum at $63,500 and $1,800, respectively.