Bitcoin Rallies to $65,000 on Soft CPI, but On-Chain Selling Limits Gains
Bitcoin's rally to nearly $65,000 on soft U.S. inflation data is facing headwinds as both long-term and short-term holders cash out, signaling fragile market conviction despite an uptick in exchange volumes.
Bitcoin climbed to nearly $65,000 this week after softer-than-expected U.S. inflation data, but the rally is being met with aggressive selling from two distinct camps of crypto investors. The simultaneous offloading is creating significant overhead supply just as the market attempts a breakout.
The initial surge from $61,500 was driven by June consumer price inflation rising just 3.5% year-over-year, missing the 3.8% consensus forecast. Core CPI, excluding food and energy, came in at 2.6% year-over-year with a flat monthly reading, while the producer price index also fell below expectations. The data pushed the dollar index down half a percent to 100.48 and pulled Treasury yields lower.
However, on-chain analytics indicate that conviction remains thin. Long-term holders who purchased near cycle highs are capitulating, using the price bounce to exit at smaller losses rather than risking deeper drawdowns. Concurrently, short-term holders who bought the recent lows are taking profits at a pace exceeding $4 million per day.
"As price rallies toward $66k, LTH realized loss volume is spiking! Cycle-top buyers are using the relief rally as an exit opportunity, locking in losses at a smaller margin than the sub-60k lows allowed," an analyst noted. "Selling into strength rather than waiting for recovery is a pattern consistent with exhausted conviction among underwater long-term holders."
"Adding to the sell-side pressure from LTH loss realization, short-term holders who bought near the recent lows are now taking profit at volumes last seen close to the peak in May," the analyst added. In May, a similar profit-taking wave occurred when bitcoin briefly rose above its 200-day average at $82,000.
Market participants warn that the macroeconomic catalyst for the rally may already be fading. Skeptics point out that the favorable inflation reading was heavily influenced by a 10% drop in gasoline prices through June. Brent crude has since reversed to a one-month high amid escalating tensions in the Strait of Hormuz.
"The 3.5% [CPI] number was driven by a 10% drop in gasoline through June, and that move had already reversed before the report was published, with Brent at a one-month high as the Hormuz situation escalates," said Ryan Lee, chief analyst at Bitget. "Markets are rallying on a June photograph, while July develops differently, and the July print will be the first to carry the war premium."
Geopolitical risks are further dampening sentiment. U.S. strikes on Iran are now in their fourth consecutive day, and the crypto Fear & Greed Index has barely moved, shifting from 22 to 25, which remains in Extreme Fear territory.
“While the inflation data is genuinely constructive and while positive headlines are very refreshing, it's worth noting the backdrop hasn't cleared with U.S. strikes on Iran are into a fourth consecutive day, and the Fear & Greed Index only moved from 22 to 25, still Extreme Fear. One soft CPI print against an active military escalation is not the same as a durable regime shift in risk appetite,” said Jasper De Maere, an OTC trader at Wintermute.
Underneath the price action, June did provide a glimmer of structural improvement for crypto infrastructure. Centralized exchange trading volumes rose for the first time in five months. Spot volumes climbed 15.3% to $1.11 trillion, while real-world asset perpetual volumes surged to a record $311 billion.
