The US CPI (Consumer Price Index) data has a significant impact on the trends of cryptocurrencies, especially mainstream coins like Bitcoin and Ethereum. Join my live stream tonight for a detailed explanation.

Mainly transmitted through market sentiment, macroeconomic expectations, and monetary policy paths.

Core Influence Logic
1. CPI → Federal Reserve policy expectations → Market liquidity expectations → encryption currency prices
CPI exceeded expectations and rose → Market expects the Fed to delay rate hikes or cuts → US dollar strengthens, US bond yields rise → Risk assets (including cryptocurrencies) are under pressure and decline
CPI lower than expected → Market expects the Federal Reserve to cut interest rates early → US dollar weakens, liquidity easing expectations rise → encryption currencies usually rebound

2. The attribute of cryptocurrency as a "risk asset"
Although cryptocurrencies are often promoted as "anti-inflation assets," in actual trading they are closer to high-risk tech stocks (such as the NASDAQ index).
When the CPI triggers market risk aversion, funds often flee risk assets and turn to the US dollar or government bonds.

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Historical Case Verification
-June 2022 (CPI 9.1%):
After the U.S. announced the highest CPI in 40 years, Bitcoin plummeted 12% on that day, Ethereum dropped 15%, and the market anticipated aggressive interest rate hikes from the Federal Reserve.
- October 2023 (CPI 3.7%):
Inflation remains stubbornly higher than expected, Bitcoin fell 8% that week, dropping below $27,000.
- April 2024 (CPI 3.4%, slightly below expectations):
Within one hour of the data release, Bitcoin surged 7%, breaking through $66,000.
- May 2024 (CPI 3.4%, in line with expectations ):
The market reaction is muted, with Bitcoin fluctuating within a narrow range, highlighting the importance of expectation management.

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Key conduction mechanism
1. Real Interest Rate and Holding Cost
High CPI drives up nominal interest rates, if real interest rates (nominal interest rates - inflation) rise,
The opportunity cost of holding interest-free encryption currencies increases, and selling pressure intensifies.
Example: After the actual interest rate turned positive in 2023, Bitcoin continued to move sideways.

2. The Amplification Effect of Leverage Liquidation
The leverage in the cryptocurrency market is high (usually 5-20 times). The violent fluctuations triggered by CPI can easily lead to a chain of liquidations:
- When rising: Short position liquidation → Accelerated rise (short squeeze).
- When falling: Long position liquidation → Accelerated decline (death spiral).

3. Institutional Capital Flow
Inflation data changes the asset allocation strategies of institutions (such as ETF managers):
- Strong expectations for interest rate cuts → Capital flows into Bitcoin spot ETFs (such as January 2024).
- Strong expectations of interest rate hikes → Funds are moving to money market funds.

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Trading Strategy Reference
1. Typical fluctuations before and after CPI announcement
-1 to 3 days before the announcement: Market volatility (such as the IV of Bit) surges, and prices usually move sideways or decline (risk aversion sentiment).
-Announcement moment (20:30 EST): Price reacts sharply within 1 minute (±3-5%).
-1 hour after announcement: Direction confirmed, volatility gradually decreases.

Suggestion: Short-term traders should avoid holding positions without protection and may use options for hedging; long-term investors should ignore the noise.

2. Other data that need to be observed
- Core CPI: Excluding energy and food, reflecting true inflation stickiness.
- PCE Price Index**: An indicator that the Federal Reserve places more importance on.
- Non-farm payrolls/hourly wage**: Affects the Federal Reserve's "dual mandate" (inflation + employment).

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Current market environment (mid-2025)
- Delay in interest rate cut expectations: Due to fluctuating inflation in Q1 2024, the Federal Reserve has pushed back the timing of interest rate cuts from March to September, causing Bitcoin to drop from 73,000 to oscillate in the 60,000 range.
- Key Threshold: If the CPI remains above 3%, Bitcoin will struggle to break through its previous high; if the CPI drops below 2.5%, it may trigger a new bull market.

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Conclusion
> CPI is the "catalyst" of cryptocurrency rather than the "steering wheel":
> - In the short term, CPI data creates fluctuations by changing liquidity expectations;
> - In the long term, the trend of Bitcoin depends on supply and demand (halving cycles, ETF inflows) and macro cycles (whether interest rate cuts become a trend).
>
> Suggested operation:
> - Reduce leverage before the CPI is released, or position in volatility derivatives (such as options).
> - Pay attention to the price direction 30 minutes after the CPI announcement; the success rate of trend trading is higher.

The cryptocurrency market is still maturing, but its sensitivity to macro data has become similar to that of traditional risk assets.
Understanding the linkage between CPI and Federal Reserve policies is one of the keys to grasping the pulse of the encryption market.