Bitcoin Hits 2-Month High, $587M Shorts Liquidated Amid CPI Data

Bitcoin extended its gains on Tuesday, climbing approximately 4.5% to trade just above $95,500, marking its strongest price level since mid-November. This significant advance triggered a cascade of liquidations in the cryptocurrency derivatives market. According to data from CoinGlass, an estimated $587 million worth of crypto short positions were liquidated, with about $292 million of that total tied directly to Bitcoin. This massive liquidation event underscores the violent market moves that can occur when leveraged bets against the asset’s price are rapidly unwound, amplifying the upward momentum.

The rally followed a period of consolidation and reflects improving sentiment toward digital assets compared to late 2025. Market participants have been positioning around macroeconomic cues, with a particular sensitivity to shifts in expectations over global liquidity and monetary policy. As Bill Barhydt, founder and CEO of Abra, explained to Decrypt, “Bitcoin’s price appears closely tied to expectations around global liquidity.” He pointed to anticipated expansions in the money supply, driven by government bond purchases, and potential retail stimulus around the midterm elections as factors supporting the bullish outlook.

While Bitcoin soared, traditional U.S. equity markets sent mixed signals early in the earnings season. The divergence was stark between sectors. Financial stocks, led by JPMorgan Chase, weighed heavily on major indexes. JPMorgan reported weaker-than-expected results, causing its shares to slide more than 4% and pulling the broader financial sector lower. This performance dragged on the Dow Jones Industrial Average (DJI), which lagged behind its peers.

In contrast, the S&P 500 (SPX) and the Nasdaq (NDX) demonstrated resilience, hovering near recent highs despite the banking sector’s weakness. This bifurcation highlights how investor sentiment is being shaped by sector-specific earnings outcomes rather than a uniform market view. The tone for the quarter appears to be set by these early financial reports, creating a cautious backdrop for the Dow while technology and broader market indices hold their ground.

The December Consumer Price Index (CPI) report provided a key macroeconomic backdrop for the day’s trading. The data showed U.S. inflation holding steady at a 2.7% annual pace, perfectly in line with forecasts. Underlying “core” inflation, which excludes volatile food and energy prices, rose 2.6%. Month-to-month gains in both the headline and core CPI were modest, indicating a lack of re-acceleration in price pressures.

This outcome reinforced prevailing market expectations that the Federal Reserve will keep interest rates unchanged in the near term. The inflation rate, while steady, remains above the Fed’s 2% target, giving policymakers room to tread carefully on any further easing. However, markets continue to price in the possibility of rate cuts later in 2026 as the economy is expected to cool. The report resulted in subdued equity volatility and only modest moves in the U.S. Dollar and Treasury yields, reflecting a market that had largely anticipated the numbers.

The data also entered the political arena, with President Donald Trump framing it as justification for looser monetary policy, thereby renewing pressure on Federal Reserve leadership to cut rates. This political dimension adds another layer of complexity to the central bank’s decision-making process as it balances its inflation mandate against economic growth and external pressures.