Bitcoin experienced significant price volatility this week, surging to $122,000 during an intraday high before quickly retreating. At the time of writing, Bitcoin is trading at $119,117, reflecting a sharp drop from its earlier highs.
Investors should closely watch the market as the US Consumer Price Index (CPI) report approaches, with potential implications for the crypto market’s direction.
Bitcoin Investors Are Gaining Optimism
In August, profit realization by long-term Bitcoin holders (7-day simple moving average or SMA) slowed significantly. After a remarkable July, which saw one of the largest profit-taking periods in Bitcoin history, the trend of consistent daily profits above $1 billion has tapered off.
The decreased selling activity among long-term holders is contributing to the positive outlook for Bitcoin. As the market stabilizes, investors are showing increased confidence in the cryptocurrency’s long-term potential.
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Bitcoin is currently also benefiting from growing interest, with new addresses increasing by 15% over the past ten days. The number of active addresses has risen to 367,349, marking a 9-month high.
This uptick signals that Bitcoin is gaining traction among new investors and participants, bolstering the overall market sentiment. Bitcoin’s price momentum could be significantly influenced by the upcoming US CPI report. Ideally, a higher CPI leads to a surge in interest rates, making BTC and other crypto assets a lucrative investment as they act as an inflation hedge. But the situation has changed this time around.
The Impact Of CPI On BTC Price
Bitcoin is currently trading at $119,117 after spiking beyond $122,000 in the past 48 hours, marking a monthly high. However, Bitcoin faced a sharp drop soon after, landing at its current price.
Currently, Bitcoin is facing resistance just below the $120,000 level. This has acted as a strong barrier in recent price action, preventing the cryptocurrency from moving higher.
Should the upcoming US CPI report show a higher-than-expected 2.8% YoY inflation, Bitcoin’s price could remain consolidated under this resistance level. This is because the Pearson correlation between BTC and US equities is at 0.76. In April and May this year, Bitcoin moved as stock markets did amid similar conditions, and a low CPI led to a rise in BTC’s price.
The recent tariff wars have further complicated the situation, and ideal definitions have proved to be an exception this year. Crypto Analyst Michael Van De Poppe shared a similar outlook, speaking to BeInCrypto.
“I don’t think we should be using historical data in 2025, as it doesn’t make sense. There’s also a data point that shows you’ll need to sell in May and come back in September, while technically we’ve seen a massively strong breakout of the markets since May,” Michael stated.
Thus, if the CPI report comes in below the forecasted 2.8%, maintaining the current 2.7% YoY from July, Bitcoin may push past the $120,000 resistance. A positive CPI report could pave the way for Bitcoin to reach $122,000 and potentially extend its rally towards the all-time high (ATH) of $123,218.
Disclaimer
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