US Inflation Cools: Why Did Bitcoin and Stock Prices Drop?

The latest US inflation figures indicated a significant decrease, but instead of seeing a sustained rally, both Bitcoin and US stocks experienced a sharp sell-off during US trading hours.

Key Takeaways

US inflation measured by CPI dropped more than anticipated, leading to initial price spikes in Bitcoin and stocks.
The subsequent sell-off in both markets was attributed to large-scale selling activity rather than macroeconomic deterioration.
Tracking Bitcoin’s taker sell volume provides insight into market movements; aggressive selling was observed around the CPI release.
The overall CPI data indicates an easing in inflation, which is supportive for risk assets in the long run, despite the short-term volatility.

This price movement left many traders bewildered. However, the reason lies more in market structure, positioning, and liquidity than in macroeconomic factors.

Overview of the CPI Release Impact

In November, the headline Consumer Price Index (CPI) showed a drop to 2.7% year-over-year, which fell short of the expected 3.1%. The core CPI also came in lower than anticipated at 2.6%.

On the surface, this was considered a positive signal for risk assets in 2025. Initially, Bitcoin experienced an upswing towards $89,000, and the S&P 500 also rose shortly after the data was released.

However, this rally was short-lived.

Within about 30 minutes post-CPI release, Bitcoin experienced a significant reversal. After reaching daily highs around $89,200, BTC swiftly dropped to near $85,000.

The S&P 500 mirrored this trend, undergoing sharp intraday fluctuations that erased most of its initial gains before settling.

The combined sell-offs in crypto and equities indicate that the decline stemmed from structural factors rather than isolated sentiment or asset-specific concerns.

Analyzing Bitcoin’s Taker Sell Volume

The key indicator of this sell-off can be found in Bitcoin's taker sell volume.

On the intraday charts, significant spikes in taker sell volume occurred just as Bitcoin began to decline. Taker sells represent aggressive selling where market orders hit bids, signaling the market's reaction to pressure rather than passive profit-taking.

These spikes coincided with US market hours and matched the steepest portion of the decline.

Looking at a weekly perspective, similar bursts of sell-side activity appeared repeatedly over the past week, particularly during high-liquidity times. This suggests that the sell-offs were due to forced selling rather than isolated retail exits.

The behavior aligns with patterns typically seen in liquidation cascades, volatility-targeting strategies, and algorithmic de-risking, which tend to amplify as prices move against leveraged positions.

The CPI report itself did not trigger the sell-off due to poor performance; instead, it caused volatility because it was perceived as good news.

Improved liquidity and tightened spreads made it easier for large players to execute trades. This likely led Bitcoin’s initial spike to encounter a dense zone of resting orders and stop-losses. Once upward momentum stalled, prices reverted, prompting liquidations and stop-outs.

As liquidations intensified, forced market selling accelerated the decline, explaining the rapid drop rather than a gradual descent.

The S&P 500’s erratic movement also reveals similar behavior, where quick downward shifts and recoveries during major releases often indicate dealer hedging, options gamma effects, and real-time risk adjustments.

Observations on Market Manipulation

Many observers noted the extreme nature of the market fluctuations:

At 8:30 a.m., CPI figures were revealed to be lower than expected.
Following the positive CPI news, Bitcoin surged by $2,217, climbing from $87,260 to $89,477 in just an hour.
The crypto market gained $70 billion, and $94 million worth of shorts were liquidated.

While the charts do not definitively demonstrate manipulation, they do illustrate patterns often linked to stop-runs and liquidity extraction. The movements typical in leveraged markets are usually not driven by individual traders but by large funds, market makers, and systematic strategies operating across various markets.

In the volatile crypto landscape, where leverage remains high and liquidity can vanish rapidly, these trading dynamics can appear extreme.

Conclusion: CPI Impact and Market Recovery

Despite the sell-off, the CPI data still signals that inflation is genuinely easing, which remains supportive for risk assets over time. The market's reaction was primarily a short-term readjustment in positioning, rather than a macroeconomic shift.

Going forward, traders will monitor whether Bitcoin can stabilize above its recent support levels and if sell-side pressure dissipates as liquidations clear.

If the taker sell volume decreases and prices stabilize, the positive implications of the CPI data may still unfold in the coming sessions.