Huobi HTX Chief Analyst Cloud: Leverage liquidation in the crypto market is already fairly complete, leaving limited room for further short-term sharp declines.

On November 11, the US October CPI came in above expectations. Following the data release, BTC briefly dipped to around $73,000 as markets began pricing in a 50-basis-point rate hike in December. In response, Cloud, Chief Analyst at HTX, noted that a 50-basis-point hike is unlikely, with a 25-basis-point hike remaining the base case; the current pullback is more akin to a pricing correction. His reasoning is threefold:

The Fed prioritizes data continuity. Historically, there are very few instances where a single month's CPI jump altered the rate hiking pace, meaning a single outperformance is insufficient to overturn the gradual trajectory;

This round of inflation persistence mainly stems from the lagged pass-through of tariffs and rent, which will naturally fade. Marginal employment is also weakening, giving the Committee no reason to layer aggressive tightening on top of the peak transmission period;

Credit spreads have already widened from 93 basis points to 348 basis points, meaning financial conditions have essentially tightened. Another 50-basis-point hike would amount to actively creating financial stability risks.

In the crypto market, funding rates have turned negative, perpetual contract open interest has fallen nearly 20% over the past week, and the Fear & Greed Index has plunged into deep fear territory. Leverage liquidation has been fairly thorough, leaving limited room for further sharp declines in the short term. However, an oversold move does not necessarily trigger an immediate rebound; waiting for the next two months' CPI data to confirm a decline is necessary. If inflation exceeds expectations for two consecutive months and a 50-basis-point hike materializes, a trend-driven downturn would begin. Currently, the probability of this scenario remains low.

Note: The content of this article does not constitute investment advice, nor does it offer, solicit, or recommend any investment products.