Bitcoin Seeks Liquidity as US CPI Inflation Drops to Record Lows

Summary:
Bitcoin is experiencing significant price volatility after a surprising drop in US Consumer Price Index (CPI) inflation to its lowest level since 2021. This unexpected decrease has led to increased speculation about interest rate cuts by the Federal Reserve. BTC's price movements suggest a pattern similar to those seen earlier this year, raising questions about future price trends.

Key Takeaways

Bitcoin traders are navigating increased volatility as the CPI report comes in lower than expected.
The US inflation rate has dropped, causing speculation about potential interest rate cuts.
Bitcoin's price movements appear to be mirroring patterns from early 2025.

Bitcoin Seeks Liquidity as US CPI Inflation Drops to Record Lows

Bitcoin Faces Volatility Following CPI Surprise

Recent data from Cointelegraph Markets Pro and TradingView indicates that Bitcoin (BTC/USD) climbed above $89,000 before making a downward reversal.

BTC/USD One-Hour Chart

This price fluctuation followed the release of the latest Consumer Price Index (CPI) for November, which revealed one of the most significant monthly declines in years, contradicting market expectations.

According to an official report from the US Bureau of Labor Statistics (BLS), "The all-items index rose 2.7 percent for the 12 months ending November, down from 3.0 percent over the previous year ending September." The report also highlighted that the October CPI was not published due to the government shutdown.

Reacting to this unexpected news, the trading resource The Kobeissi Letter suggested that contrary inflation signals could persist into the coming year. They noted, "This places Core CPI inflation in the US at its lowest level since March 2021."

US CPI 12-Month % Change

The CPI figure came in considerably lower than the forecasted 3.1% increase, marking a "massive" shortfall, according to crypto trader Daan Crypto Trades. He commented, "Risk assets like $BTC are rallying on the back of this news, which is compounded by a significant drop in the dollar and bond yields."

Fed Target Rate Probabilities

Data from CME Group's FedWatch Tool indicates that there is a 26.6% probability of an interest rate cut at the Federal Reserve's meeting scheduled for January 28.

Will Bitcoin Hit a New Long-Term Low?

As reported by Cointelegraph, traders expressed skepticism about Bitcoin's price movements over the past week due to instances of "fakeouts" during US trading sessions.

Related: Bears Take Control Below $90K? 5 Key Insights on Bitcoin This Week

Concerns over potential market "manipulation" arose as BTC/USD faced significant resistance levels both above and below, making it difficult to establish a new trend. Currently, total liquidations in the cryptocurrency market throughout the past 24 hours have surpassed $630 million, according to CoinGlass.

Crypto Total Liquidations

With continued abrupt price movements, crypto trader and entrepreneur Ted Pillows noted parallels to early 2025's market behavior. "BTC is reflecting the Q1 2025 fractal; what might happen if this plays out?" he asked, sharing a chart of Bitcoin futures.

The chart suggests that another significant low for BTC/USD may still be on the horizon, reminiscent of early April when Bitcoin briefly dipped below $75,000.

Bitcoin Futures Chart Fractal