Bitcoin’s latest attempt at a sustained recovery faltered again, with prices retreating to around $86,000 after briefly rallying on softer U.S. inflation data. The pullback underscores the market’s fragility as macro optimism tied to CPI prints collides with persistent liquidity constraints and profit-taking by short-term holders.
Market Reaction: CPI Relief Proves Short-Lived
Following the release of U.S. CPI data that showed headline inflation easing toward 3% year-on-year, bitcoin initially climbed above $90,000, gaining roughly 4% intraday. That move quickly reversed, however, with prices sliding more than 6% from local highs as broader risk assets softened and Treasury yields edged higher.
Derivatives markets reflected the reversal. Perpetual futures funding rates flipped negative within hours, while open interest across major exchanges fell by an estimated 8%, signaling forced long liquidations and a reduction in leveraged exposure. Spot volumes also tapered off, suggesting that the CPI-driven rally lacked strong follow-through from longer-term capital.
Macro and Policy Backdrop Still a Headwind
The failed breakout highlights how sensitive bitcoin remains to shifting macro expectations. While cooling inflation keeps the prospect of future rate cuts alive, Federal Reserve officials have reiterated that policy will remain restrictive until inflation is firmly anchored. Real yields near cycle highs continue to pressure non-yielding assets, including crypto.
At the same time, regulatory clarity has not translated into immediate upside. Despite the ongoing growth of U.S. spot bitcoin ETFs, net inflows have moderated compared with earlier in the year. Weekly data shows ETF inflows running at less than $500 million, down sharply from multi-billion-dollar peaks, limiting their ability to absorb selling pressure during volatile sessions.
Investor Sentiment and Positioning
From a behavioral perspective, the repeated failure to hold CPI-driven gains is reinforcing a cautious mindset among traders. Short-term holders, defined as wallets holding bitcoin for less than 155 days, have been net sellers during recent rallies, locking in profits after a strong year-to-date performance.
Longer-term investors appear more resilient but not aggressively adding. On-chain metrics show long-term holder supply remaining relatively stable, while realized volatility has compressed compared with earlier this cycle. This combination points to a market caught between conviction and caution, where rallies are sold until clearer macro or liquidity catalysts emerge.
Looking ahead, bitcoin’s ability to reclaim momentum will depend on whether easing inflation translates into looser financial conditions rather than short-lived relief rallies. Traders will be watching upcoming Fed communications, bond market signals, and ETF flow data closely. Until those indicators turn decisively supportive, bitcoin may remain vulnerable to sharp pullbacks that challenge bullish narratives and test investor patience.
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