Bitcoin (BTC) Volatility In Full Swing As US CPI Data Hits 2.9%

The price of Bitcoin (BTC) is experiencing unusual volatility following the release of the US Consumer Price Index (CPI). As a significant gauge for inflation in the United States, the CPI is at 2.9%, the lowest recorded since March 2021.

This reading is crucial for the Federal Reserve as it shows that its monetary policies yield the desired result. Slowing inflation, as indicated by the CPI reading and other core economic indices, can help shape the sentiment for BTC prices in the mid-to-long term.

Bitcoin, Altcoin, and the Macro-economy

Current Bureau of Labor Statistics data points to a very healthy US economy. With CPI coming in at 2.9%, market experts are primarily not focused on the fears of an impending recession. Notably, with this CPI figure, the expectation of an interest rate cut remains high.

Many central banks, including the Bank of England, have started cutting interest rates to rebalance the economy. The Federal Reserve is currently weighing this decision, although officials expect a more sustained rate lowering before cutting the rates.

The CPI jumped by 0.2% in July and 2.9% year over year. This figure compares to the expected 3% for July and the recorded 3% for June. Following the release of this data, the price of Bitcoin initially soared by over 5% following the report. When writing, the coin has backtracked and is changing hands for $59,451.55 with a 0.25% uptick.

The Bitcoin volatility has also spread to the altcoin world. As of writing, Ethereum (ETH) has slipped by 0.3% to $2,654.71, and Solana (SOL) price comes in at $146.85 with a mild 0.14% surge. Dogecoin (DOGE) and Cardano (ADA) are in selloff modes with 2.3% and 0.39% drops respectively.

The uncertainty and price reaction are relatable. Ideally, the slowing inflation figures are positive for Bitcoin. Should the Fed cut interest rates, traditional safe assets like bonds and treasury bills will become less attractive. Given a comparatively better growth rate, there might be more embrace of Bitcoin and altcoins moving forward.

Mixed Bitcoin (BTC) Price Recovery Catalysts

Despite the positive macroeconomic trends, there are still visible headwinds ahead, with top analysts like Peter Brandt seeing unclear trends in Bitcoin prices. The Mt.Gox Bitcoin repayment has continued to trigger primary selling pressure for the top coin.

While the market has not entirely recovered from the German government’s Bitcoin selloffs, Mt Gox recently moved another 33,100 BTC, underscoring an impending distribution. Once the beneficiaries receive this BTC, their large profit margins might force them to sell rather than HODL.

Despite the optimism on the horizon, the Bitcoin price might not be liberated until the Mt. Gox distribution is completed. 

In the short term, the inflows into spot Bitcoin ETF products like BlackRock’s IBIT and Fidelity Investment’s FBTC might help cushion the fallout from unforeseen selloff outlets. The BlackRock Bitcoin ETF has raked in more than $20 billion since inception, a figure that sets it above any other global ETF launched Year-to-Date (YTD). 

This large liquidity might provide a much-needed anchor for BTC should the ongoing volatility continue.