U.S. CPI Posts Biggest Drop Since 2020 as Bitcoin Rebounds Above $64,000

Bitcoin, the world’s largest cryptocurrency, is highly sensitive to U.S. interest rates, dollar liquidity and investors’ appetite for risk. The Consumer Price Index is therefore a key catalyst because it can reshape expectations for Federal Reserve policy. Institutional demand has also become a larger market force since the U.S. Securities and Exchange Commission approved spot Bitcoin ETFs in January 2024, helping offset concerns over wallet security and Lightning Network technical hurdles.

Bitcoin climbed above $65,000 on Aug. 10 before retreating toward $64,000 on Aug. 11 as traders awaited the July CPI report. The U.S. Bureau of Labor Statistics said on Aug. 12 that annual inflation eased to 3.4%, prompting markets to raise the probability of a Federal Reserve pause in September to about 60%. Bitcoin subsequently traded near $63,000, while continued inflows into U.S. spot Bitcoin ETFs provided an underlying source of demand.

An unexpected cooling in the US producer price index for June strengthened expectations that inflationary pressure was easing and the Federal Reserve could move toward looser monetary policy. The data from the Bureau of Labor Statistics improved sentiment toward risk assets, helping Bitcoin rebound as investors reassessed the outlook for interest rates and market liquidity.

Bitcoin initially climbed above $65,500, its highest level in nearly three weeks, before extending the advance to about $66,300 and approaching a one-month high. The move marked a fresh attempt to break out of its recent trading range, though some investor groups sold into the rally. Traders remained cautious about whether Bitcoin could hold above the key threshold and sustain further gains.

The Personal Consumption Expenditures (PCE) price index, released by the US Commerce Department's Bureau of Economic Analysis (BEA), is a key gauge used by the Federal Reserve to assess inflation and set interest-rate policy. The May reading rose to a three-year high, cooling expectations for the timing of rate cuts. US stocks weakened, weighing on risk assets and exposing Bitcoin to concentrated selling pressure.

Bitcoin plunged to $58,000 following the US May PCE data, marking a 21-month low, while inflation concerns also sent US stocks lower in volatile trading. The rapid correction triggered cascading closures of leveraged positions, with more than $600 million liquidated across the cryptocurrency market in just one hour. Some traders questioned whether the market had been “manipulated.”

The US consumer price index is a key gauge used by the Federal Reserve in setting interest-rate policy. Core CPI, which excludes volatile food and energy prices, offers a clearer view of underlying price pressures. Weaker-than-expected core inflation typically supports risk assets such as Bitcoin because rising expectations of rate cuts can improve liquidity and investor appetite.

The latest data showed that higher energy prices lifted headline US inflation, while core inflation slowed, prompting a short-term rebound in crypto markets. Bitcoin recovered to about $62,600 and held up better over the week than other tokens. Investors will next focus on the Federal Reserve’s interest-rate meeting and Chair Jerome Powell’s comments on the timing of rate cuts.

Bitcoin has continued to retreat from its highs, with $62,000 emerging as a key support level for the market. The U.S. Bureau of Labor Statistics’ consumer price index (CPI) influences expectations for Federal Reserve rate cuts, which in turn affect dollar liquidity and valuations for risk assets including cryptocurrencies. That makes the U.S. inflation reading for May particularly important.

Bitcoin most recently fell below $62,000 and briefly approached $61,000. More than $426 million in positions were liquidated across the market over the past 24 hours, with long positions accounting for about 80%, while the Fear Index dropped to 12. U.S. core CPI subsequently rose 0.2% month on month in May, less than the market had feared, helping Bitcoin pare some losses. The $60,000 threshold nevertheless remains under pressure.

The pace of cooling U.S. inflation is shaping the Federal Reserve’s rate-cut timetable and valuations of risk assets such as bitcoin. The Federal Reserve Bank of Cleveland forecast that annual consumer price inflation would accelerate in April, fueling concerns that interest rates could remain elevated for longer and weakening investors’ willingness to deploy capital.

The Cleveland Fed estimated that April CPI would rise 3.56% from a year earlier, while market expectations cited in related reports ran as high as 3.7%. MicroStrategy has also paused bitcoin purchases, while bearish technical signals have emerged. Analysts warned that bitcoin could retest the $70,000 level if it fails to break above and hold its 200-day exponential moving average (EMA).

Bitcoin (BTC) is highly sensitive to inflation and interest-rate expectations. A smaller-than-expected increase in the U.S. Producer Price Index (PPI) signaled easing upstream price pressures and raised expectations of a shift toward looser monetary policy, lifting risk assets including cryptocurrencies. The $76,000 level has become a key test of whether the rebound can continue.

In the latest rally, BTC briefly broke above $76,000 after the U.S. PPI release, posting its strongest performance since mid-March, but it subsequently failed to hold that level. On-chain analytics firm CryptoQuant warned of mounting near-term selling pressure, while traders realized profits on roughly 63,000 BTC during the advance. The market is now watching whether Bitcoin can regain a firm foothold above $76,000.

The US Bureau of Labor Statistics' core Consumer Price Index (CPI) excludes volatile food and energy prices. It is a key gauge used by the Federal Reserve to assess inflation trends and interest-rate policy. Cooling inflation data typically benefits risk assets and can also affect cryptocurrencies such as Bitcoin.

US core CPI rose 0.2% month on month in March, below market expectations of 0.3%. Bitcoin climbed to about $72,400 after the data was released and briefly touched $73,000 intraday. However, markets still see little likelihood of a Federal Reserve rate cut in April.

Bitcoin and risk assets such as U.S. stocks are highly sensitive to the outlook for U.S. interest rates. A hotter-than-expected Producer Price Index from the U.S. Labor Department pushed back market expectations for Federal Reserve rate cuts. Persistent bond-market concerns over inflation and broader economic risks drove capital toward safe-haven assets such as gold, putting cryptocurrencies under selling pressure.

Bitcoin initially fell to about $65,000 in a weekend sell-off, while Solana, XRP and Dogecoin each dropped about 6%. Although Bitcoin and U.S. stocks briefly stabilized afterward, the cryptocurrency failed to hold above $66,000. Market analysis remained cautious on March 27, with Bitcoin holders' unrealized losses estimated at $600 billion. Only some AI-related tokens continued to attract buying interest.

Bitcoin is highly sensitive to interest-rate and inflation expectations. February’s consumer price index from the U.S. Bureau of Labor Statistics matched market forecasts and did not support a near-term Federal Reserve rate cut. Still, falling oil prices helped ease inflationary pressure and supported risk assets including cryptocurrencies.

Bitcoin quickly reversed its overnight losses after the February CPI release, first breaking above $70,100 and then climbing past $71,000. Markets also digested news of a 400 million-barrel oil release. Ether, Solana and Cardano (ADA) rose in tandem, showing little drag from weakness in U.S. stocks.