The latest US inflation report triggered an immediate short squeeze across the digital asset market. In June, the Consumer Price Index (CPI) unexpectedly fell by 0.4%, marking its steepest monthly decline since April 2020. On an annual basis, inflation slowed to 3.5%, while core inflation dropped to 2.6%.
Against this backdrop, the probability of a Federal Reserve rate hike collapsed to a symbolic 8%, while US stock market futures moved higher. On crypto exchanges, the release triggered an immediate cascade of liquidations among traders betting on further declines.
1,810% imbalance: How Ethereum absorbed the hardest hit
According to CoinGlass, short liquidations surged to $134.90 million in the first hour alone, while long traders lost just $7.06 million. This created an abnormal 1,810% imbalance, with short sellers being forcibly closed out 19.1 times more than buyers.
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The main surprise of this short squeeze was that Ethereum, rather than Bitcoin, absorbed the largest blow. In just one hour, ETH short sellers lost $56.71 million, while short liquidations in BTC futures were notably lower at $41.14 million.
Hourly liquidation heatmap, Source: CoinGlass
The unusual skew toward Ethereum was also confirmed by the largest single liquidation of the past 24 hours. On Binance, the system forcibly closed an ETHUSDT position worth $6.37 million. Overall, the market liquidated 89,498 traders over the past day, with total losses reaching $413.37 million.
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Inflation falling below 4% opens the door for the Federal Reserve to begin cutting interest rates as early as this autumn. For the crypto market, this means a potential influx of liquidity, as digital assets are often the first to react to expectations of cheaper money in the United States.
The current wave of short liquidations has weakened the bears' ability to keep prices within the previous downward channel, establishing new medium-term support levels for BTC and ETH at $63,500 and $1,800, respectively.
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