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Leveraged Shorts Wiped Out in Derivatives Flurry
Building on a recovery that wiped out Monday’s losses, bitcoin comfortably surpassed the $65,000 threshold on Wednesday. This latest leg up moved in lockstep with the release of U.S. producer price index (PPI) data. Mirroring the previous day’s consumer price index (CPI) release, the PPI’s unexpected 0.3% month-over-month deflation caught analysts by surprise, many of whom had anticipated prices to hold flat.
Before testing levels last seen on June 22, the top cryptocurrency spent much of Tuesday evening through early Wednesday consolidating between $64,500 and $65,000. The gridlock broke shortly after 8 a.m. EST, when a sharp rally propelled bitcoin to an intraday peak of $65,518. It has since retraced, trading just above $64,800 as of 12:45 p.m. EST to secure a marginal 24-hour gain.
Bitcoin’s brief surge to the $65,500 threshold saw its market capitalization breach the $1.3 trillion mark and brought its gains since the beginning of the month to approximately 10%. Nevertheless, data also showed that the cryptocurrency was still 3% below its June 16 value of nearly $67,000.
In the derivatives market, bitcoin’s fluctuating price resulted in over $58 million in leveraged bets being wiped out, with short positions accounting for nearly 85% of the total. Overall, liquidations across the cryptocurrency market reached $324 million, with short bets accounting for $209 million of this total.
Although ongoing clashes in the Middle East have continued to grab headlines since the start of the week, the release of U.S. inflation data—both CPI and PPI—has seemingly given markets a much-needed boost. The decline in both indexes has seen the odds of the Federal Reserve raising interest rates at its upcoming meeting plunge from just over 40% earlier in the week to just 12%.
However, since the data covers the month of June, analysts warn it may not provide the most accurate picture of where things stand, particularly as reports and evidence of damage inflicted on vital oil infrastructure in the Middle East start to emerge. Already, the prices of both Brent crude and West Texas Intermediate (WTI) have jumped on the escalation, and expectations are that this trend will continue unless Washington and Tehran decide to give diplomacy another chance.
ETF Inflows Signal Macro Shift Over Geopolitical Noise
For bitcoin, the latest escalation has failed to spark the panic seen during the war’s opening weeks—at least according to Nicolai Sondergaard, a research analyst at Nansen. Sondergaard noted that spot bitcoin and ether ETF inflows on July 15 offer clear proof that Tuesday’s CPI print has materially shifted the near-term macroeconomic outlook. The report showed headline inflation slowing to 3.5% year-over-year against a 3.8% consensus, while core inflation cooled to 2.6% against the forecast 2.9%.
“The DXY is trading near 100.77, its weakest level in months, and the 10-year yield has eased to 4.57% after briefly touching 4.61% pre-CPI. For a high-beta asset, that combination removes the immediate rate headwind that has been the dominant ceiling since May,” the analyst said.
From Sondergaard’s perspective, Nansen data show exchange outflows holding up through the geopolitical noise, meaning buyers are absorbing supply rather than stepping away. “The Iran blockade headline and the associated oil spike, WTI up roughly 14.6% in five days, did not change that pattern.”
Instead, the Nansen analyst asserts that on-chain data shows that wallets that typically move first and largest in these setups have not shifted toward stablecoins in any meaningful way. This, Sondergaard argues, is consistent with what was observed prior to the Middle East escalations.
“Short-term leveraged longs get flushed, and then accumulation resumes. The funding rate is running near zero right now, which removes the immediate overleveraged long risk and means the next leg, if it comes, has a cleaner base to work from,” Sondergaard explained.
The analyst also acknowledged that the inflation and liquidity channel is doing more work here than the geopolitical hedge narrative. “MVRV sits at 1.205 with realized price at roughly $53,000 and the long-term holder cost basis around $49,900, which defines the structural floor. That is not the profile of a market running on geopolitical sentiment.”
For Sondergaard, the FOMC meeting on July 28 and 29 is the actual binary event: if the CPI data holds and the Fed signals a credible pivot path, the conditions for sustained ETF inflows are back in place.