Composite CPI fell to 2.7% in November, reflecting US inflation surprise. Increase sentiment towards cryptocurrencies

Global markets suffered severe liquidity whiplash today as conflicting central bank signals and a massive derivatives flash collided.

A stronger-than-expected 2.7% rise in the US Consumer Price Index (CPI) triggered a risk-on rally that wiped out a $60 million crypto short, but traders remain wary as the Bank of Japan (BOJ) prepares to raise interest rates to a 30-year high, potentially depleting the very liquidity the US just promised to inject.

Savior Print: Bears hit hard with consumer price index 2.7%

The rally was triggered by an undeniably bullish US inflation report. The overall CPI increase rate in November was only 2.7%, much lower than the expected 3.1%. Importantly, core CPI has fallen to 2.6%, indicating that disinflation is accelerating.

However, the report contained a warning. In the wake of the recent U.S. government shutdown, the Bureau of Labor Statistics admitted it used “imputed” (estimated) data from October, leaving some analysts skeptical about the purity of the signal.

whale rescue

The market reaction was brutal for the bears. Bitcoin and Ethereum skyrocketed, causing short-term liquidations of $60 million within 30 minutes.

This vertical candle served as a lifeline for the legendary “insider whale” tracked by on-chain analysts. Bleeding heavily with his $600 million long ETH and nearing the liquidation price of $2,132, Whale's “crazy belief” paid off as he added $35.5 million to the trade just before printing, and the CPI surprise forced a massive squeeze.

Bank of England: “Despair” cut

On the other side of the Atlantic, the Bank of England added liquidity and cut interest rates by 0.25% to 3.75%, the sixth cut this cycle.

But this rescue cut Not a victory lap. With Britain's GDP contracting by 0.1% in October in a narrow 5-4 vote, Governor Andrew Bailey warned that the UK economy's footing remained fragile despite pre-Christmas stimulus and that further cuts were on the brink.

Bank of Japan: A looming threat

While the US and UK are easing monetary policy, a huge liquidity threat looms in Asia. The Bank of Japan is widely expected to raise interest rates tomorrow to 0.75%, the highest level in 30 years. Polymarket's probability of interest rate hike is 98%.

The Bank of Japan's interest rate hike would raise yen borrowing costs, potentially forcing a sharp unwinding of the yen carry trade that has supported speculative assets for years.

Historical data warns that the Bank of Japan's rate hike cycles so far have coincided with Bitcoin's 20-30% decline.

The market is currently caught between the immediate euphoria of the US Fed put and the structural danger of Japan's liquidity drain.

Short-term price movements depend on follow-through. Traders will be monitoring US Treasury yields, the direction of the dollar, and the latest Fed odds. However, year-end positioning may increase volatility.