Bitcoin and the broader crypto markets confronted a jolt on January 12 after the newest US Shopper Worth Index (CPI) knowledge got here in hotter than anticipated. The shock despatched Bitcoin briefly downward earlier than bouncing again, spurring a variety of reactions amongst merchants and analysts.
The US Bureau of Labor Statistics launched figures displaying a 0.5% month-over-month rise in CPI, inserting annual inflation at 3.0%—above the beforehand anticipated 2.9%. In the meantime, Core CPI (excluding unstable meals and vitality prices) grew by 0.4% month-over-month, settling at a 3.3% annual fee and equally surpassing consensus forecasts.
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Shortly earlier than the info went reside, Bitcoin noticed a fast drop of -2.1% to $94,250, which some market observers speculate may be tied to merchants or insiders receiving an early trace of the inflation overshoot. Nevertheless, the downturn proved momentary; costs rebounded to highs of $98,100 as anxious retail merchants watched the market response unfold.
A ‘Purchase The Information’ Occasion For Bitcoin?
Santiment, an on-chain evaluation agency, weighed in on the volatility in a weblog publish dated February 13. In an replace titled “CPI Catching the Crowd’s Eye…”, Brian Quinlivan, Director of Advertising and marketing at Santiment, famous that market contributors have change into acutely delicate to any inflation information, particularly given the turmoil of the previous few years.
Citing a 15-month excessive in CPI-related discussions throughout social channels like X, Reddit, Telegram, 4Chan, Bitcointalk, and Farcaster, Santiment highlighted the magnitude of merchants’ apprehension: “Initially, simply earlier than the CPI Report was introduced, Bitcoin briefly dropping -2.1% to $94,250 earlier than recovering barely. This very nicely may have been some massive insiders that have been getting wind of the excessive inflation information forward of time. Nevertheless, costs shortly recovered to as excessive as $98,100 as retails have been displaying concern.”
The publish additional defined that the shock of this CPI launch has reignited fears linked to Federal Reserve coverage adjustments. After chopping charges all through 2023 and 2024, the Fed abruptly halted additional cuts in November 2024.
Santiment warns this may sign a protracted interval with out extra fee reductions: “Now that inflation numbers are concernedly excessive within the US, many are predicting that it will likely be fairly a very long time earlier than we see additional cuts, which historically profit the markets. The speed rises in 2022, which have been largely attributed to the large crypto correction, are nonetheless contemporary in peoples’ reminiscences.”
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Regardless of the prospect of prolonged financial tightening, Santiment noticed a possible contrarian sign involving Bitcoin holder counts: “We’ve got already been seeing a decline in complete holders on the Bitcoin community, and that is typically a bullish sign. A really perfect situation could be for small merchants to overreact to this information, permitting whales and sharks to scoop up extra cash and ship costs skyrocketing. Primarily based on the early worth rebounds following the information, this can be shaping as much as be a ‘promote the rumor, purchase the information’ situation.”
Market watchers past Santiment have additionally chimed in. Tom Dunleavy, Companion at MV International, additionally supplied an optimistic tackle the info, particularly noting the position of shelter prices: “The important thing driver of this scorching CPI print was housing (1/3 of headline and 40% of core inflation). This studying is massively lagged by nearly a 12 months. Nothing to fret about as extra actual time readings present housing flat to falling in main markets,” he remarked through X.
For a lot of merchants, the burning query stays: Will this “scorching” CPI studying mark the beginning of a brand new inflationary pattern—or is it merely a quirk of delayed knowledge? Santiment’s suggestion of a attainable “promote the rumor, purchase the information” dynamic displays how swiftly sentiment can shift in a crypto market usually pushed by momentum and social consensus. In the meantime, Dunleavy’s housing-focused breakdown underscores that headline inflation numbers might be misleading with out dissecting the underlying elements.
At press time, BTC traded at $96,028.
Featured picture created with DALL.E, chart from TradingView.com