Huobi HTX Chief Analyst Cloud: Crypto market leverage has been largely flushed out, limited room for further short-term declines
Odaily reports: US October CPI came in above expectations. Following the data release, BTC briefly fell to around $73,000, and the market began betting on a 50 basis point rate hike in December. In response, Huobi HTX Chief Analyst Cloud believes the probability of a 50 basis point hike is low, with 25 basis points remaining the base case, and the current decline is closer to a pricing correction. There are three reasons: the Fed values data continuity, and historically there have been very few cases where a single month's CPI jump changed the pace of rate hikes—a single month's upside surprise is insufficient to overturn the gradual path; the stickiness of this inflation round mainly comes from the lagged pass-through of tariffs and rents, which will naturally decay, while employment is also weakening at the margin, giving the committee no reason to layer aggressive tightening on top of the peak of pass-through; credit spreads have already widened from 93 basis points to 348 basis points, financial conditions have effectively tightened, and another 50 basis points would amount to actively creating financial stability risk.
In the crypto market, funding rates have turned negative, perpetual contract open interest has fallen nearly 20% in a week, the Fear and Greed Index has dropped into the extreme fear zone, leverage has been fairly thoroughly flushed out, and the room for further short-term deep declines is limited. However, an overshoot does not mean an immediate rebound; confirmation is needed from CPI falling over the next two months. If inflation exceeds expectations for two consecutive months and a 50 basis point hike materializes, a trend decline would only then begin—currently this scenario is seen as having a low probability.
Note: The content of this article is not investment advice, nor does it constitute any offer, solicitation of an offer, or recommendation for any investment product.
