Crypto recovers as inflation cools

TLDR

• Bitcoin reclaimed US$70K as US CPI cooled to 2.4% YoY
• Total crypto market cap rebounded to US$2.4T on higher volumes
• US spot Bitcoin ETFs saw net outflows, trend still negative
• XRP jumped 25% amid 192M tokens withdrawn from major exchanges
• Largest BTC short squeeze since Sep 2024 cleared leverage
• Alt rotation broadened, but sentiment remains fragile

Introduction

Crypto steadied into the close, led by Bitcoin reclaiming, but failing to hold above US$70K after US inflation data came in cooler than expected. Liquidity improved, derivatives leverage reset, and altcoins outperformed in pockets. Yet sentiment remains cautious, with ETF flows mixed and risk still selective. Let’s unpack the signals behind this rebound.

Weekly trading stats as of Monday, February 16th at 11:00 AM AEDT, based on data from TradingView in USD.

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Bitcoin reclaims US$70K as CPI cools

Bitcoin’s rebound above US$70K followed January CPI at 2.4% YoY, a touch below forecasts, restoring risk appetite after a volatile fortnight. Total market cap recovered to US$2.4T as volumes rose across majors, a typical pattern when macro data eases rate cut uncertainty. While price action improved, sentiment remains fragile, with the Fear and Greed Index lodged in extreme fear, a contrarian indicator historically seen near local bottoms. Taken together, softer inflation, healthier liquidity, and cleaned-up positioning form a constructive backdrop. Still, confirmation requires follow-through, ideally with higher highs, stable funding, and spot demand persisting beyond the initial macro-driven impulse.

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ETF flows signal lingering caution

US spot Bitcoin ETFs posted US$359.9M in net outflows last week, trimming early-week gains, before a modest US$15.2M inflow on Friday. The 30-day moving average of flows remains negative, underscoring persistent institutional caution. Notably, BlackRock’s IBIT saw only minimal 0.2% redemptions, suggesting stronger conviction among longer-horizon holders relative to more tactical products. For price discovery, sustainable inflows matter more than single-day prints, particularly when macro tailwinds appear. If outflows stabilise while liquidity improves on exchange, the drag from redemptions should abate. Until then, ETF data continued to act as a reality check on exuberance, tempering the recovery narrative.

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XRP rallies on exchange withdrawals

XRP outperformed with a 25% advance from its US$1.11 low, coinciding with 192.37M XRP exiting Binance from 7-9 February. Exchange reserves fell to 2.553B XRP, the lowest since January 2024, a pattern consistent with accumulation and rising self-custody. Technically, a break-out and hold above the US$1.50 psychological level opens a near-term target band around US$1.60-1.65, with rising volumes adding confirmation. Relative strength versus BTC and ETH improved as regulatory sentiment brightened and leadership visibility increased. Risks include fickle momentum and potential supply returning on rallies. For trend validation, watch sustained closes above US$1.50 and declining exchange inventories.

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Short squeeze resets leverage and funding

Bitcoin saw the largest short squeeze since September 2024, with about US$736M in short liquidations as funding rates flipped negative, shorts paying longs to hold positions. Approximately US$189M in futures positions were liquidated over 24 hours, with shorts bearing the brunt as price snapped back above US$70K. Total futures open interest fell 28% over the month to roughly US$34B, indicating a meaningful clearing of speculative leverage. Historically, deep squeezes accompanied by negative funding and shrinking open interest often precede more durable bases. Confirmation requires steady funding near neutral levels and rebuilding open interest on spot-led, not leverage-led, advances.

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Final thoughts

This recovery has credible foundations, softer inflation, improved liquidity, and a healthier derivatives backdrop. Still, ETF flows are the swing factor, further stability or a turn to net inflows would strengthen the case for continuation. Altcoin rotation is broadening, memecoins and XRP leading, but selectivity remains prudent until spot demand deepens. Key watchpoints, funding normalisation, sustained closes above US$70K, and whether alt strength persists without dragging BTC dominance sharply lower. For active traders, volatility creates opportunity, but risk management is paramount as narratives shift quickly.

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