The U.S. June consumer price index (CPI) slowed by more than expected, triggering mass liquidations of investors who had bet on declines in the cryptocurrency market. Ethereum (ETH) short positions were unwound on a larger scale than bitcoin (BTC), indicating a rapid reversal in short-term sentiment.

According to blockchain media outlet U.Today on Monday, short positions liquidated in the cryptocurrency market totalled $134.9 million in the first hour after the U.S. CPI release. Long liquidations were limited to $7.06 million over the same period, leaving short liquidations about 19 times larger than longs and creating a so-called 1,810 percent imbalance.

The sharp market move began with a U.S. inflation reading that came in lower than expected. The June CPI fell 0.4 percent from the previous month, the biggest monthly drop since April 2020. The annual inflation rate slowed to 3.5 percent, and core CPI excluding food and energy eased to 2.6 percent.

Markets took it as a sign that inflation pressures were easing. As a result, the likelihood that the Federal Reserve would move to further tighten policy fell sharply, and the probability of a rate increase dropped to about 8 percent. U.S. stock index futures also rose, showing a return of risk appetite.

The cryptocurrency derivatives market was the first to be hit. CoinGlass data showed that in the first hour after the CPI release, losses on short positions were 19.1 times those on long positions. Over the full day, 89,498 traders were forcibly liquidated, with total liquidations reaching $413.37 million.

The asset hit hardest in the short squeeze was ethereum rather than bitcoin. In the first hour after the release, ethereum short liquidations totalled $56.71 million, exceeding bitcoin futures short liquidations of $41.14 million. The largest single liquidation over the past 24 hours was also an ETHUSDT position worth $6.37 million on Binance.

This is interpreted as a sign that short-term downside bets were more concentrated in ethereum. After the inflation data release, stronger-than-expected buying flowed in, triggering a chain of liquidations in ethereum short positions and creating a classic short squeeze in which rising prices caused further liquidations, according to an analysis.

Market participants are focusing on the fact that U.S. inflation has fallen below 4 percent again. If inflation continues to slow, the Fed could become more likely to begin cutting rates as early as this autumn. Because cryptocurrencies are a representative risk asset sensitive to interest rates and liquidity changes, expectations of easing rate pressure are seen as having boosted buying sentiment.

A shift is also being detected in technical trends. Some assessments say that as large-scale short liquidations cleared a significant portion of bearish positions, prior downward pressure has weakened. U.Today reported that after this move, there are suggestions that new medium-term support levels for bitcoin and ethereum could form around $63,500 and $1,800, respectively.

In the market, the prevailing view is that the surge is less a simple price rebound than a reshuffling of positions in the derivatives market. With ethereum posting larger short liquidations than bitcoin, confirming a short-term concentration of investor positioning, some forecasts say the cryptocurrency market could remain volatile depending on additional inflation data and signals from the Fed's monetary policy.