I've noticed an interesting pattern: every time inflation data is released, the market starts to go absolutely crazy. Last week, exactly the same thing happened—the price of Bitcoin made a sharp jump upward, broke through the previous high, and then fell with significant swings over a short period. Why does this happen? It turns out it all comes down to the CPI and its influence on monetary policy.

The CPI is, essentially, a way to measure how much prices for goods and services have increased. Imagine that you’re tracking the cost of a loaf of bread, a shirt, and a toy. If a year ago bread cost $80 and now it costs $85, that’s reflected in the index. When all these goods are combined, you get an overall picture of inflation. Governments look at this indicator to understand whether prices are rising too quickly.

So the CPI isn’t just boring statistics—it’s a signal that determines whether central banks will change interest rates. During the pandemic, there was madness: money was being printed, rates fell to almost zero, and all that money flooded into the markets. Cryptocurrency surged, stocks rose, and home prices went up. But then inflation surged to a 30-year high, and the Fed had to act.

The Federal Reserve began raising rates to stop prices from rising. Every time new CPI is released, the market recalculates the probability of the Fed’s next move. If inflation is falling, that may mean rates will be cut soon, and then money will start looking for risky assets again—like crypto. If the CPI remains high, rates will stay where they are or even be raised further.

The CPI is a key indicator because interest rates affect the cost of money. When money is expensive, people and companies are less willing to borrow and invest. Liquidity in the market shrinks, and risky assets start to fall. When rates are low, money is cheap, and capital looks for ways to put itself to work. That’s why all three of the most recent Bitcoin halvings happened under conditions of low rates—there was an inflow of capital into the market.

Now the situation is different. Rates remain high, and M2 (money supply) is practically not growing, unlike in the 2020–2021 period. That creates a completely different dynamic. So when people talk about a bullish crypto market, you need to understand that everything depends on when the Fed will start cutting rates—which is directly tied to the CPI and employment data.

When these data come out, volatility usually follows. If you’re holding a futures position, it’s better to know the exact publication time—typically mid-month at 8:30 a.m. Eastern Time. The market instantly reprices the situation and makes assumptions about future rate moves. You can track these expectations through special probability charts on various analytics platforms.

In general, the CPI isn’t just an inflation indicator—it’s a window into what will happen with interest rates, and therefore with capital flows into the cryptocurrency market. The better you understand this connection, the better you can predict market moves. This has become especially important because crypto is no longer a marginal asset—institutional investors are putting money into it, spot ETFs have appeared, and even politicians are discussing it during elections. The cryptocurrency market is increasingly driven by macroeconomic factors, just like traditional markets.