Bitcoin Approaches $90K Despite CPI Indicating Reduced US Inflation: What's Happening?

Bitcoin Approaches $90K Despite CPI Indicating Reduced US Inflation: What's Happening?

Summary: Despite a lower-than-expected Consumer Price Index (CPI) report, Bitcoin has shown positive momentum, nearing the $90,000 mark. Increased open interest suggests new market positioning rather than simply covering shorts. Onchain data indicates a phase of repair and loss absorption for Bitcoin, hinting at market stability.

Key Takeaways:

A lower-than-expected CPI has contributed to Bitcoin's rally as new positions are established instead of merely covering short positions.
Onchain data signifies that Bitcoin is undergoing "balance-sheet" repairs and absorbing losses, indicating market stabilization rather than the onset of capitulation.

CPI Report Boosts BTC Price As New Positions are Established Near $90,000

After the recent CPI report indicating lower inflation, Bitcoin has experienced a noticeable price increase. According to crypto trader Back, this movement has been characterized by rising open interest, suggesting that new market positions are opening up rather than just short sellers being squeezed. Moreover, options gamma exposure is balanced around the current price level, allowing for potential price movements if market liquidity increases.

Bitcoin Analysis by Back. Source: X

Despite the positive momentum, this move is viewed as a temporary reaction rather than the start of a long-term trend. The initial surge has been primarily driven by liquidity factors, which may allow for short-term corrections as traders reassess their positions after the initial surge.

As the year closes, traders are looking to the Bank of Japan’s (BOJ) interest rate decision on December 19. Changes in BOJ policy can impact global liquidity, especially in yen-funded markets. However, recent price trends suggest that much of this potential risk might already be reflected in Bitcoin's recent price behavior. If the BOJ's decision does not introduce significant disruptions, it may eliminate one of the last sources of uncertainty for Bitcoin in the near term.

BTC Onchain Data Signals Stabilization, Not Distribution

CryptoQuant data highlights that Bitcoin has been in a repair phase since October. Key exchange metrics, such as net unrealized profit/loss (NUPL), show that unrealized losses have stabilized. Meanwhile, the spent-output profit ratio (SOPR) indicates that coins are being sold close to their acquisition cost instead of panic selling.

Bitcoin Loss Absorption Phase. Source: CryptoQuant

During brief downward movements, deposit activities on major exchanges rise, but this activity tapers off as prices stabilize, suggesting that the selling pressure is reactive rather than indicative of a structural issue. Although inflows from highly active addresses remain high, the market value to realized value (MVRV) has stabilized, suggesting trading activity is occurring within a defined range rather than leading to speculative excess.

The new inflation data might shift market conditions favorably. Should the pressure on the dollar lessen and real yields decrease in the coming days, Bitcoin's stabilization could evolve into a more sustainable upward movement, especially if it successfully reclaims the $90,000 level.

Bitcoin Four-Hour Chart. Source: Cointelegraph/TradingView

From a technical perspective, Bitcoin needs to surpass the $90,000 mark and maintain a position above the monthly volume-weighted average price (VWAP) to exhibit confidence among buyers. A daily closing price above this level would be crucial, with immediate sell-side liquidity appearing within the fair value gap (FVG) between $90,500 and $92,000. Conversely, if Bitcoin faces rejection and short positions increase, it could test the swing lows at around $83,800.

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