BTC Breaks Higher as Record Bitcoin ETF Inflows Trigger Wave of Bearish Liquidations

Overview

Bitcoin (BTC) experienced a significant surge this week, surpassing the $96,000 mark. This upward movement was driven by renewed institutional demand and a favorable U.S. inflation report, leading to increased optimism in the crypto markets.

Bitcoin’s Rally Explained

The recent rally in Bitcoin’s price can be attributed to several key factors. Firstly, there was a notable inflow into U.S. spot Bitcoin exchange-traded funds (ETFs), which amounted to $753.7 million in net inflows on a single day. This figure represents the largest inflow since October, indicating a resurgence of interest from institutional investors. Fidelity’s ETF led the inflows with a substantial contribution, followed by other major players in the market. This influx of capital suggests that institutional investors are beginning to reallocate funds into crypto-related products after navigating challenges related to year-end portfolio adjustments and tax-related selling in late 2025.

Additionally, a softer-than-anticipated U.S. Consumer Price Index (CPI) report contributed to the positive sentiment across the markets. The CPI showed inflation holding steady at 2.7% year-on-year, aligning with expectations and alleviating concerns over aggressive interest rate hikes by the Federal Reserve. This absence of an inflation surprise has reinforced beliefs that the Federal Reserve may consider rate cuts in the future. Lower expectations for real interest rates typically favor risk assets, including cryptocurrencies, as they reduce the opportunity cost of holding non-yielding assets like Bitcoin.

As Bitcoin broke through key resistance levels between $94,000 and $95,000, many short sellers were compelled to close their positions, further fueling the price increase. Data indicated that over $290 million in Bitcoin short positions were liquidated within a 24-hour period, while only a fraction of long positions faced liquidation. This dynamic created a cascading effect that propelled Bitcoin’s price higher.

From author

The interplay of institutional interest and macroeconomic factors illustrates the complex landscape of the cryptocurrency market. The significant inflows into Bitcoin ETFs signal a shift in investor sentiment, potentially marking a turning point after a prolonged period of sideways trading. The impact of inflation data on risk assets cannot be understated, as it shapes the expectations of monetary policy and influences investor behavior.

Impact on the crypto market

• Bitcoin’s price surge has led to a total market capitalization exceeding $3.3 trillion, reflecting broader optimism in the crypto space.
• The substantial inflow into Bitcoin ETFs indicates a renewed interest from institutional investors, which could signal a longer-term trend of increased participation in the cryptocurrency market.
• The liquidation of short positions highlights the volatility and risk associated with bearish strategies in a rapidly changing market environment.
• The favorable inflation data has broader implications for risk assets, potentially encouraging further investment in cryptocurrencies as market participants seek to capitalize on shifting economic conditions.
• Continued corporate accumulation and sustained ETF inflows suggest that underlying demand for Bitcoin remains robust, which may support future price appreciation.