Inflation Cools to 2.7% Lifting Crypto Market Sentiment

• Cooling US inflation weakens hawkish Fed outlook and revives global risk appetite
• Global rate cuts align with softer inflation, boosting liquidity-sensitive crypto assets
• Short liquidations amplify Bitcoin rally as traders reprice rates and dollar pressure

Global markets were hit with a violent liquidity whiplash today as conflicting central bank signals collided with a massive derivatives flush. 

While a cooler-than-expected 2.7% US CPI print triggered a risk-on rally that liquidated $60 million in crypto shorts, traders remain on edge as the Bank of Japan (BoJ) prepares to hike rates to a 30-year high, potentially draining the very liquidity the US just promised to inject.

Related: Why the Bank of Japan’s 25 Bps Hike Could Trigger a Crypto Sell-Off

The Savior Print: 2.7% CPI Crushes Bears

The catalyst for the rally was an undeniably bullish US inflation report. November headline CPI rose just 2.7%, significantly missing the 3.1% forecast. Crucially, the Core CPI dropped to 2.6%, signaling that disinflation is accelerating.

However, the report came with a caveat: due to the recent US government shutdown, the Bureau of Labor Statistics admitted to using “imputed” (estimated) data for October, leaving some analysts skeptical of the signal’s purity.

Related: Why Bitcoin Stays Volatile After the Latest US Jobs Report

The Whale Rescue

The market reaction was brutal for bears. Bitcoin and Ethereum ripped higher, triggering $60 million in short liquidations within 30 minutes. 

This vertical candle served as a lifeline for a legendary “Insider Whale” tracked by on-chain analysts. Bleeding out on a $600 million ETH long and nearing his $2,132 liquidation price, the whale’s ‘insane conviction,’ adding $35.5 million to the trade moments before the print, paid off as the CPI surprise forced a massive squeeze.

Bank of England: The ‘Desperation’ Cut

Across the Atlantic, the Bank of England added to the liquidity injection, cutting interest rates by 0.25% to 3.75%, its sixth cut this cycle.

However, this was a rescue cut rather than a victory lap. With UK GDP shrinking 0.1% in October and the vote split narrowly at 5-4, Governor Andrew Bailey warned that future cuts would be a closer call, leaving the UK economy on fragile footing despite the pre-Christmas stimulus.

Bank of Japan: The Looming Threat

While the US and UK are easing, a massive liquidity threat looms in Asia. The Bank of Japan is widely expected to hike rates to 0.75% tomorrow, its highest level in 30 years. Polymarket odds for the hike sit at 98%.

A BoJ hike would increase the cost of borrowing Yen, potentially forcing a violent unwind of the Yen carry trade that has fueled speculative assets for years. 

Historical data warns that previous BoJ hiking cycles have coincided with 20-30% drops in Bitcoin. 

The market is now caught between the immediate euphoria of the US Fed Put and the structural danger of a Japanese liquidity drain.

Near-term price action now depends on follow-through. Traders will monitor Treasury yields, dollar direction, and updated Fed probabilities. However, year-end positioning may add volatility.

Related: Bitcoin Price Prediction: BTC Extends Fragile Phase as Technical Pressure, Flows, and Macro Signals Converge