October CPI sparks another crypto wipeout, but is buying the Bitcoin dip too risky? - AMBCrypto

The latest U.S. inflation data has reignited fears of a prolonged economic slowdown, with the headline CPI climbing 0.4% in October against expectations of 0.3% and core CPI rising 0.3% versus a forecast of 0.2%.

Economist Peter Schiff noted that the 0.4% monthly increase brings the year-to-date rise to 4.15%, and if the trend continues, inflation could hit 5% by year-end. He warned that this sustained inflation pressure will force the Fed to keep monetary policy tight, adding further headwinds to risk assets.

The macroeconomic uncertainty has triggered a sharp selloff in the crypto market, with Bitcoin falling from $79,000 to $73,000 in a single week. Retail sentiment has turned extremely bearish, with only 0.82 bullish comments for every bearish one on social media, a level of pessimism that has historically preceded market bottoms.

Market indicators point to deeper downside

Despite the extreme bearishness, Santiment’s contrarian buying signal faces a reality check. The post-CPI reaction has triggered three long liquidations above $500 million in under two weeks, indicating massive deleveraging as traders are squeezed out of their positions.

On-chain data further supports the bearish outlook. The market cap of Tether has shrunk by $6.6 billion over the last 60 days, more than double the drop during the FTX collapse. Large Bitcoin holders have reduced their balances by over 34,000 BTC, worth approximately $2.6 billion, as they shed exposure amid rising liquidity concerns.

Reduced liquidity and a lack of smart money accumulation suggest this downtrend may not be a typical short- to long-term holder transition phase. Instead, it signals a deeper correction, making the risk-to-reward ratio on buying the dip unfavorable.