CPI Fully Exceeds Expectations, Analysts Warn $70,000 BTC Level Faces Major Test

Author: Curry, TechFlow

TechFlow Summary:

Driven by the latest U.S. CPI inflation data coming in higher than expected, rate cut expectations have been dealt a blow, putting pressure on the entire crypto market which experienced a broad selloff. Bitcoin lost key psychological support at $74,000, dropping over 3% intraday and triggering over $180 million in long liquidations across the network within hours. Analysts from multiple institutions warn that short-term support has retreated to around $73,000; if bulls fail to stabilize selling pressure, Bitcoin will likely test further downside and probe the heavily traded support zone at $70,000. This indicates that the liquidity premium previously priced in from rate cut bets is being rapidly erased by the market, leaving late-position buyers facing direct pressure from leveraged position unwinds.

The shadow of inflation once again blankets Wall Street, swiftly tightening the liquidity premium on risk assets.

According to The Block, following the release of hotter-than-expected U.S. CPI inflation data, Bitcoin quickly sold off from its intraday high, breaching both the $75,000 and $74,000 round-number defenses, dipping to around $73,200 at its lowest. Derivatives markets subsequently faced a wave of long squeezes; data monitored by Coinglass shows that total liquidations for crypto assets across the network reached $184 million over the past four hours, with long positions accounting for over 82% of the total.

A sudden shift in macro sentiment is the direct catalyst behind this sharp pullback. Previously, Bitcoin had maintained a high-level consolidation driven by institutional capital, but this resurgence of sticky inflation directly disrupted market expectations for looser Fed monetary policy. The CME FedWatch tool indicates that after the data release, traders' pricing for a 25-basis-point rate cut by the Fed in December plummeted from 81% the previous day to 56%, while the likelihood of a pause in cutting or maintaining higher rates for longer rose significantly.

Core Inflation Unexpectedly Rises, Dealing a Blow to Fed Rate Cut Expectations

The rebound in inflation data shattered prior stable expectations.

Data released by the U.S. Bureau of Labor Statistics shows that the October Consumer Price Index (CPI) increased 2.6% year-over-year, aligning with the rebound trend, but month-over-month readings and core inflation performance all came in above market expectations, indicating stubborn resilience in services and housing costs. According to Bloomberg, following the inflation data release, the U.S. Dollar Index (DXY) surged nearly 40 points intraday, while the 10-year U.S. Treasury yield quickly approached a recent peak of 4.45%.

The choice made by macro capital is very straightforward. According to Reuters quoting analysts, when risk-free yields on U.S. Treasuries remain strong at elevated levels, interest-rate-sensitive cryptocurrencies and growth tech stocks are hit first, prompting capital to rotate into defensive assets immediately.

Short-Term Loss of $74,000 Defense Line, $70,000 Becomes Bulls' Final Barrier

After breaking below $74,000, the technical defense pivot has shifted significantly lower.

Citing calculations by BRN market research analysts quoted by The Block, Bitcoin's previous high resistance-turned-support level has been broken; $73,000 is now the immediate buffer zone. If spot buying cannot re-establish turnover above $73,000, the downward channel for prices will open further.

The greater test lies at the $70,000 threshold. According to the latest market briefing released by 10x Research, $70,000 is not only a historically dense chip distribution zone from the last breakout round but also a critical strike price for numerous institutional OTC options. Coinglass liquidation heatmaps similarly show that the largest concentration of leveraged long liquidation lines and passive buy orders on the market is clustered in the $70,000 to $70,800 range.

Once $70,000 falls, it won't only mean the complete structural breakdown of the breakout rally, but could also trigger a new wave of institutional stop-loss orders and liquidation chain reactions.

Derivatives High-Leverage Unwind Tests Spot ETF Absorption Capacity

The catalyst for the chart decline is deleveraging in the derivatives market.

Monitored by Glassnode, before the data release, Bitcoin open interest (OI) remained consistently in historical high ranges, and funding rates stayed at elevated annualized levels above 15% for consecutive days. This overheated leverage structure became an instant target for liquidity harvesting the moment macro headwinds materialized.

The absorption capacity of institutional buy orders becomes another critical factor determining subsequent trends. Statistics from SoSoValue indicate that capital inflow speeds into recent U.S. spot Bitcoin ETFs have noticeably slowed compared to previous peaks. If spot ETFs flip to net outflows amid negative inflation developments, on-chain organic capital alone will struggle to quickly absorb the selling pressure.

For highly leveraged longs, this unexpected inflation surge has already triggered one round of forced liquidations on paper; for spot holders, the upcoming defensive baseline is clearly drawn at $70,000. This sharp pullback is currently serving as a recalibration of macro expectations, not the end of the bull market cycle.