Here’s How The Most Bullish US CPI Since 2021 Impacted The Market

Markets cheered the most bullish US CPI data since 2021. Bitcoin and the broader crypto sector surged in immediate response.

However, this was negated a few hours later as the markets continued to remain bearish. This prolonged the decline that began in October.

Analysts view this development as a turning point for the markets. This is especially with the fact that the rate hike by the Bank of Japan has been priced in. The event led to more bearish sentiment this week as it affected the borrowing power of participants, reducing their buying capacity.

The bullish CPI data has fueled hopes of a market reversal as investors price in future rate cuts. Yet markets may still fall if upcoming jobs and growth numbers fail to confirm the disinflation trend.

Most Bullish US CPI Sparks Market Reaction

The most recent US CPI report for December 2025 showed that headline inflation was 2.7% year-over-year. It was lower than the expected 3.1%. Core CPI, on the other hand, was 2.6%, which was the lowest level since April 2021.

Additionally, the figure was the largest drop since the year started. Also, it was getting closer to the Fed’s 2% target.

The US unemployment rate reached its highest level since September 2021. This showed the economy was not doing well. This decline in inflation could lower the cost of borrowing. It would help investors in their risk-on assets.

However, some people doubted the accuracy of the data because of recent delays caused by the government shutdown. This could mean that costs like energy had not been fully accounted for.

High unemployment meant that consumer demand was falling. This could lead to a recession if inflation in services stays high. The data ignited more hope, but it also highlighted that some issues remained unclear.

The only way to mitigate the negative unemployment data was by cutting rates more and injecting liquidity into the markets.

Bitcoin Price Spikes Past $88K Zone

On the charts, the price of Bitcoin spiked slightly past $88,000 upon the release of the bullish CPI data. However, this move did not last, though it hinted at the potential market turn.

Bitcoin jumped from about $85,000 to $88,500 within minutes. The rest of the crypto market quickly followed the surge.

Above the $87,000 mark, the bulls became more aggressive, as seen in the size of the candles. It had long wicks above them.

As the market rose, Bitcoin ETFs were also seeing positive inflows. In fact, about $436 million in capital was pumped into these products. This aligns with the short-term shift in the markets.

As Bitcoin showed some volatility, the S&P 500 rose 1.3%, and the Nasdaq rose 1.8%. It indicated a chance for gains as the odds of a rate cut increased. However, there was a scuffle.

Massive Short Positions Liquidated

The impact did not end at Bitcoin and the Wall Street stocks. The broader crypto market, especially those shorting, was hit hard. Within an hour of this news, short sellers liquidated about $67 million, while long traders lost only $4.61 million.

However, when considering the larger context, it was the long traders who experienced greater losses. The liquidations cleared about $387 million in buy orders, while those selling lost $225 million.

This implied the amplified liquidations in the hour of CPI news indicated the release favored upward potential.

Altogether, the data hinted that the markets could be bracing for a reversal. However, the immediate rejection at $88K for Bitcoin price meant the move was not ripe yet.