The volatility of Bitcoin continues to captivate investors worldwide, and recent economic developments in the United States may well determine its next major move. As expectations turn towards the imminent release of inflation data, an intriguing correlation between the Consumer Price Index (CPI) and Bitcoin’s fluctuations has been highlighted.
A Lower CPI: The Key to a New All-Time High?
Markus Thielen, chief analyst at 10x Research, recently stated that Bitcoin could reach a new all-time high if inflation in the United States, as measured by the Consumer Price Index (CPI), slowed down enough. “If inflation prints 3.3% or lower, Bitcoin should reach a new all-time high,” he declared in a report published on May 29. Thielen refers to the upcoming release of the CPI results by the U.S. Bureau of Labor Statistics (BLS), set for June 12.
The CPI for May stood at 3.4%, a slight decrease from the previous month. However, this figure is still too high to allow a significant rise in Bitcoin. Thielen points out that, in the two weeks leading up to the May results’ release, inflows into Bitcoin exchange-traded funds (ETFs) remained strong in anticipation of lower inflation. He also noted that if the CPI results exceed expectations, the momentum could weaken, as observed earlier this year.
Since May 13, inflows into Bitcoin ETFs have been positive on a day-to-day basis, with the largest influx recorded on May 21, amounting to $305.7 million. Thielen believes that Bitcoin price movements are not random but are mainly influenced by critical factors such as inflation. He adds that several instances this year have shown that higher-than-expected CPI results have led to declines in Bitcoin prices. For example, on April 10, the CPI printed at 3.5%, just 0.1% higher than expected, and a few weeks later, Bitcoin’s price dropped by 6.67% to $56,000.
The Implications of the CPI on Bitcoin
Markus Thielen explains that price movements are not random but are mainly influenced by critical factors such as inflation. “There are no ‘random’ movements in Bitcoin’s price; it all boils down to critical drivers, the primary one being inflation,” he asserted.
Bitcoin exchange-traded funds (ETFs) launched in January also showed how investors react to economic data. Despite massive inflows of $611 million on the first day, flows tapered off when CPI results were higher than expected. Thielen attributes this situation to higher-than-expected CPI results, which weakened Bitcoin in January and led to consolidation until March.
If the June CPI is below forecasts, it could bolster investor confidence and spur a new wave of bitcoin buying. Lower inflation could not only support Bitcoin but also enhance the perception of digital assets as a hedge against inflation.
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