Bitcoin and the cryptocurrency market in general faced a shock on January 12th after the latest US Consumer Price Index (CPI) data (CPI) came in higher than expected. This shock caused Bitcoin to drop briefly before recovering, triggering a range of reactions among traders and analysts.
The US Bureau of Labor Statistics has released data showing that the CPI increased by 0.5% per month, pushing the annual inflation rate to 3.0%—higher than the previously predicted 2.9%. Meanwhile, the core CPI (which excludes volatile food and energy costs) rose by 0.4% per month, remaining at 3.3% annually and also surpassing consensus forecasts.
Before the data was released, Bitcoin quickly dropped -2.1% to $94,250, with some market observers speculating that it may be related to traders or insiders receiving early hints of inflation surpassing the threshold. However, this downturn is only temporary; the price has rebounded to as high as $98,100 as retail traders anxiously monitor the market's response.
'Buy the news' event for Bitcoin?
Santiment, a chain analysis company, has considered the volatility in a blog post on February 13. In the update titled 'CPI attracts crowd attention...', Brian Quinlivan, Marketing Director at Santiment, noted that market participants have become extremely sensitive to any news about inflation, especially when considering the turmoil of recent years.
The highest level of quotes in 15 months in discussions related to CPI on social channels such as X, Reddit, Telegram, 4Chan, Bitcointalk, and Farcaster, Santiment has emphasized the concern of traders: “Initially, just before the CPI report was released, Bitcoin fell -2.1% in a short period to $94,250 before a slight recovery. It is very likely that some people in the large crowd had heard news of high inflation before the deadline. However, the price quickly recovered to a high of $98,100 as retailers expressed concern.”
The post explains that the shock from this CPI announcement has raised fears about changes in the Federal Reserve's policy. After cutting interest rates throughout 2023 and 2024, the Fed abruptly stopped further cuts in November 2024.
Santiment warns that this could signal an extended period without further interest rate cuts: “Now, with US inflation figures at worrying highs, many are predicting it will be quite a while before we see further cuts, which usually benefit the market. The 2022 interest rate hike, largely due to the major cryptocurrency correction, still looms large in everyone's memory.”
Despite the prolonged tightening outlook on currencies, Santiment has observed a potential contrarian signal related to the number of Bitcoin holders: 'We have seen a decrease in the total number of holders on the Bitcoin network, which is often a bullish signal. An ideal scenario is that small traders may overreact to this news, allowing whales and sharks to buy more coins and push prices sharply higher. Based on the initial price recovery after the news, this could shape up a 'sell the rumor, buy the news' scenario.
Market observers outside of Santiment have also spoken out. Tom Dunleavy, Partner at MV Global, also expressed an optimistic view on the data, particularly highlighting the role of housing costs: “The main driver of this hot CPI is housing (1/3 headline inflation and 40% core). This index has been significantly lagging for almost a year. There is nothing to worry about as many real-time indicators show that housing is either flat or declining in major markets,” he commented via X.
For many traders, the question still remains: Does this 'hot' CPI index mark the beginning of a new inflation trend or is it simply the peculiar delay of data? Santiment's proposal of 'selling rumors, buying news' may reflect how quickly sentiment can change in a cryptocurrency market often driven by momentum and social consensus. Meanwhile, Dunleavy's focus on housing underscores that inflation headline figures may be misleading without analyzing the underlying components.
This page may contain third-party content, which is provided for information purposes only (not representations/warranties) and should not be considered as an endorsement of its views by Gate, nor as financial or professional advice. See Disclaimer for details.
Bitcoin faces CPI shock - But research firm says 'Buy the news'
Bitcoin and the cryptocurrency market in general faced a shock on January 12th after the latest US Consumer Price Index (CPI) data (CPI) came in higher than expected. This shock caused Bitcoin to drop briefly before recovering, triggering a range of reactions among traders and analysts. The US Bureau of Labor Statistics has released data showing that the CPI increased by 0.5% per month, pushing the annual inflation rate to 3.0%—higher than the previously predicted 2.9%. Meanwhile, the core CPI (which excludes volatile food and energy costs) rose by 0.4% per month, remaining at 3.3% annually and also surpassing consensus forecasts. Before the data was released, Bitcoin quickly dropped -2.1% to $94,250, with some market observers speculating that it may be related to traders or insiders receiving early hints of inflation surpassing the threshold. However, this downturn is only temporary; the price has rebounded to as high as $98,100 as retail traders anxiously monitor the market's response. 'Buy the news' event for Bitcoin? Santiment, a chain analysis company, has considered the volatility in a blog post on February 13. In the update titled 'CPI attracts crowd attention...', Brian Quinlivan, Marketing Director at Santiment, noted that market participants have become extremely sensitive to any news about inflation, especially when considering the turmoil of recent years. The highest level of quotes in 15 months in discussions related to CPI on social channels such as X, Reddit, Telegram, 4Chan, Bitcointalk, and Farcaster, Santiment has emphasized the concern of traders: “Initially, just before the CPI report was released, Bitcoin fell -2.1% in a short period to $94,250 before a slight recovery. It is very likely that some people in the large crowd had heard news of high inflation before the deadline. However, the price quickly recovered to a high of $98,100 as retailers expressed concern.” The post explains that the shock from this CPI announcement has raised fears about changes in the Federal Reserve's policy. After cutting interest rates throughout 2023 and 2024, the Fed abruptly stopped further cuts in November 2024. Santiment warns that this could signal an extended period without further interest rate cuts: “Now, with US inflation figures at worrying highs, many are predicting it will be quite a while before we see further cuts, which usually benefit the market. The 2022 interest rate hike, largely due to the major cryptocurrency correction, still looms large in everyone's memory.” Despite the prolonged tightening outlook on currencies, Santiment has observed a potential contrarian signal related to the number of Bitcoin holders: 'We have seen a decrease in the total number of holders on the Bitcoin network, which is often a bullish signal. An ideal scenario is that small traders may overreact to this news, allowing whales and sharks to buy more coins and push prices sharply higher. Based on the initial price recovery after the news, this could shape up a 'sell the rumor, buy the news' scenario. Market observers outside of Santiment have also spoken out. Tom Dunleavy, Partner at MV Global, also expressed an optimistic view on the data, particularly highlighting the role of housing costs: “The main driver of this hot CPI is housing (1/3 headline inflation and 40% core). This index has been significantly lagging for almost a year. There is nothing to worry about as many real-time indicators show that housing is either flat or declining in major markets,” he commented via X. For many traders, the question still remains: Does this 'hot' CPI index mark the beginning of a new inflation trend or is it simply the peculiar delay of data? Santiment's proposal of 'selling rumors, buying news' may reflect how quickly sentiment can change in a cryptocurrency market often driven by momentum and social consensus. Meanwhile, Dunleavy's focus on housing underscores that inflation headline figures may be misleading without analyzing the underlying components.