Bitcoin prices showed a muted reaction today even as US CPI (Consumer Price Index) data showed inflation eased to 2.4% in March, down from 2.8% in February.
The April 10 CPI data came in lower than expected, as analysts predicted March inflation would be 2.5%.
Cooling Inflation Pushes Bitcoin
The Consumer Price Index (CPI) is a critical economic indicator that measures inflation. It tracks the average change in prices paid by consumers for goods and services. The lower-than-expected CPI figures could give Bitcoin a much-needed boost. At press time, Bitcoin was trading at $81,800, up over 7% on the 24-hour chart.
In the United States, CPI data is released monthly by the Bureau of Labor Statistics. This has become a key market-moving event, especially for Bitcoin and other cryptocurrencies.
Bitcoin is sensitive to macroeconomic indicators like CPI because they influence the Federal Reserve’s monetary policy decisions. When CPI data shows rising inflation, markets typically anticipate interest rate hikes.
According to CME FedWatch data, the probability of a Federal Reserve interest rate cut in May has plunged from 57% to just 15%. This is due to President Trump’s 90-day tariff pause and newly released March FOMC minutes.
The news came as a relief for Bitcoin, which was reeling under the pressures of US tariffs. Yesterday, Bitcoin’s price surged over $80,000 after Trump announced the 90-day pause on all tariffs except those on China.
Nevertheless, higher interest rates can strengthen the US dollar and make risk assets like Bitcoin less attractive, often leading to short-term price drops. Conversely, lower-than-expected inflation, as in March, may suggest a more dovish Fed stance, which can boost investor appetite for Bitcoin as an alternative store of value.
Traders and institutional investors watch CPI numbers closely, adjusting their portfolios based on perceived inflation trends and monetary policy expectations.
Additionally, Bitcoin’s appeal as a hedge against inflation plays a psychological role. When CPI is high, some investors turn to Bitcoin as a safeguard against the eroding purchasing power of fiat currencies. This potentially pushes its price higher in the medium to long term—even if short-term volatility remains.
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