CPI cools down, Bitcoin surges to $69,000, and the Air Force liquidates $360 million! But with the fear index hanging at 9, is the market bottom near?

U.S. January CPI Year-over-Year Increase Falls Below Expectations to 2.4%, the Lowest Since May 2025, Below Market Forecast of 2.5%. After the data release, Bitcoin surged briefly past $69,000, with over $365 million in net liquidations across the entire network. However, the cryptocurrency fear and greed index remains at 9 for the second consecutive day, indicating “extreme fear.”
(Background: Strong rally! Bitcoin breaks $69,000, Ethereum surpasses $2,000, and short positions are liquidated for $150 million over four hours.)
(Additional context: Brazil calls for “buy 1 million Bitcoins in five years”! The House introduces the RESBit proposal to establish a national strategic BTC reserve.)

Table of Contents

• U.S. Core Inflation Hits Near Five-Year Low
• Bitcoin Shorts Surge Past $69,000
• ETH and SOL Rise Even More, but U.S. Stocks Narrow Gains at Close
• Fear Index Stays at 9—What Does History Say?
• Rate Cut Expectations Rise, but Structural Risks Remain

U.S. Core Inflation Hits Near Five-Year Low

The U.S. Bureau of Labor Statistics (BLS) released the January 2026 Consumer Price Index (CPI) last night Taiwan time, with data significantly below market expectations:

• Overall CPI: +2.4% YoY (expected +2.5%), +0.2% MoM (expected +0.3%)
• Core CPI (excluding food and energy): +2.5% YoY—the lowest since March 2021; +0.3% MoM

Notably, a 7.5% YoY drop in gasoline prices was the main factor pulling down overall inflation, but food and housing costs still rose faster than the overall CPI, indicating that consumers’ daily inflation experience has not eased accordingly.

This report shows the most moderate inflation data since May 2025, a sharp decline from December’s 2.7%. The market immediately began betting that the Federal Reserve might start cutting interest rates as early as March.

Further reading: Bitcoin’s Surge Backdrop: “Inflation” Returns to Market Focus

Bitcoin Shorts Surge Past $69,000

Following the CPI release, Bitcoin jumped from around $66,000 to $69,190 within hours, a roughly 4.8% increase in a single day. This rebound triggered a massive forced liquidation of short positions.

Total open contracts liquidated across the network exceeded $365 million, with Bitcoin short liquidations reaching $183 million. There is a dense cluster of short liquidations between $69,000 and $74,000. Once the price enters this zone, it could trigger a “cascade” of liquidations, accelerating the upward momentum.

This may still cast doubt on a trend reversal. Data from CryptoQuant shows Bitcoin recently experienced one of the top three to five largest realized losses in history, indicating many investors have already cut losses at low levels.

ETH and SOL Rise Even More, but U.S. Stocks Narrow Gains at Close

Driven by CPI optimism, major cryptocurrencies performed strongly over 24 hours:

• Bitcoin (BTC): around $69,000, up about 5%
• Ethereum (ETH): around $2,054, up about 7%
• Solana (SOL): around $85, up about 10%

ETH and SOL’s gains significantly outpaced Bitcoin, reflecting that risk appetite is returning, with funds flowing more quickly into small- and mid-cap tokens. However, SOL still declined about 18% over the past week, and ETH is down over 20% year-over-year, so the short-term rebound has not reversed the medium-term downtrend.

In the stock market, initially boosted by CPI data, the S&P 500 rose 0.62%, Nasdaq gained 0.54%, and Dow Jones increased 0.42%. But by the close, gains had narrowed considerably.

• S&P 500: close at 6,836 points (+0.05%)
• Nasdaq: close at 22,546 points (-0.22%)
• Dow: close at 49,500 points (+0.10%)

U.S. stocks opened high but closed lower, suggesting ongoing concerns about over-investment in AI-related capital expenditures, which continue to weigh on tech stocks amid the inflation cooling optimism and uncertain corporate earnings outlook.

Further reading: Will Bitcoin Rise or Fall Next? A Clear Look at Bull and Bear Arguments

Fear Index Stays at 9—What Does History Say?

Despite Bitcoin’s nearly 5% short-term rebound, the crypto fear and greed index has remained at 9 for two consecutive days, firmly in “extreme fear” territory. This persistent market sentiment divergence suggests that extreme fear often serves as a contrarian indicator.

In June 2022, during the Terra/Luna collapse, the index hit 6, and Bitcoin rebounded over 300% from its lows over the next 18 months, eventually reaching a new all-time high in 2024. Similarly, during the FTX collapse in November 2022, the index dipped to 12, marking a long-term bottom.

Currently, the index hit an all-time low of 5 on February 6, then slightly rebounded to 9. Based on historical patterns, the market may be near the “maximum pain point,” but forming a bottom could take weeks or even months.

Rate Cut Expectations Rise, but Structural Risks Remain

The cooling CPI opens the door for the Fed to cut rates. The CME FedWatch tool shows a significant increase in bets for a rate cut in March. If the Fed indeed begins a rate-cutting cycle in the coming months, risk assets including cryptocurrencies could benefit.

However, several structural headwinds remain. These include outflows from Bitcoin ETFs—by early February, Bitcoin spot ETF net outflows reached about $690 million, indicating institutional funds have not yet shifted from “hedging” to “investing” modes. Derivatives markets still hold large hedge positions, showing institutional investors lack confidence in this rebound. Lastly, uncertainties around Trump’s tariffs and trade war risks could offset the positive effects of inflation cooling.

This is not investment advice.