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How Does Consumer Price Index (CPI) Inflation Data Impact Bitcoin (BTC) Price?

3 mins
Updated by Ali M.
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In Brief

  • Within 48 hours after the US Bureau of Labor Statistics published CPI inflation data on July 12, Bitcoin price gained 4% to hit a new 2023 peak of $31,500
  • Bitcoin on-chain transaction volumes have doubled within the last 4 days, suggesting that bullish traders are gearing up for action.
  • Markets have priced another 0.3% increase in Inflation, with the Fed expected to keep Interest rates steady.
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The US Bureau of Labor Statistics will publish the next Consumer Price Index (CPI) inflation data on August 10. On-chain data analyzes the chances of another Bitcoin (BTC) price rally following the positive crypto market reaction to last month’s release. 

As Bitcoin adoption grows among governments and institutional investors, so has the impact of the monthly Consumer Price Index (CPI) data on BTC prices. Within 48 hours of the last CPI data release on July 12, Bitcoin price gained 4% to hit a new 2023 peak of $31,500. Can Bitcoin replicate this feat? 

How Consumer Price Index Inflation Data Impacts Bitcoin

Historical data shows that Bitcoin has often rallied when the markets anticipate a drop in CPI or a conservative hike. Indicatively, the CPI data released on July 12 revealed that inflation had increased mildly by only 1% during the previous month. 

Bitcoin price had gained 5% in the week leading up to the July 12 CPI release before another 4% rally in the aftermath, then pushed it to a new 2023 peak. 

A similar pattern has emerged this week. With the new CPI data expected to be released on August 10, the BTC price closed on August 9 at $29,900, up 4% from August 7. 

On-chain data indicates that crypto traders have been gearing up for another wave of bullish price action after the August 10 release.

Bitcoin Transaction Volumes Double Ahead of CPI Inflation Data Release

According to on-chain data, the volume of BTC denominations transactions has increased progressively for 4 consecutive trading days. 

As depicted in the chart below, BTC Transaction Volume for August 6 stood at 147,670 transactions. By the close of August 9, it rapidly increased to 302,500 transactions. 

This represents a remarkable 104% increase in trading activity ahead of the August 10 CPI inflation data release. 

CPI Impact on Bitcoin (BTC) Price | BTC Transaction Volume, Aug 2023
CPI Impact on Bitcoin (BTC) Price | BTC Transaction Volume, Aug 2023. Source: Santiment 

Transaction Volume evaluates changes in the overall economic activity on a blockchain network. When it increases persistently, as observed above, it is often a bullish signal indicating a growing demand among market participants. 

Considering the historical precedence from July, this 104% rise in BTC Transaction Volumes is a prime indication that crypto traders could be gearing up for another wave of bullish price action in the coming days. 

Investors Have Moved 14,500 BTC Off Exchanges in August 

On a more bullish note, Bitcoin investors have moved their coins off exchanges over the past week. This further validates the prediction that Bitcoin traders could be warming up for bullish price action ahead of the CPI inflation data release.

The Cryptoquant data below illustrates how Bitcoin Exchange Reserves have dropped by 14,577 coins within the first 10 days of August. 

CPI Impact on Bitcoin (BTC) Price | BTC Exchange Reserves, Aug 2023
CPI Impact on Bitcoin (BTC) Price | BTC Exchange Reserves, Aug 2023. Source: CryptoQuant

Exchange Reserves track real-time changes in the cumulative Bitcoin balances that investors have deposited in recognized crypto exchanges. A drop in Exchange Reserves means investors are looking to HODL to seek future gains rather than short-term selling opportunities. 

Amid growing market demand fuelled by positive CPI expectations, this drop in exchange supply could trigger a BTC price increase in the coming days. 

BTC Price Prediction: $32,000 in Focus

The In/Out of Money (IOMAP) data displays the distribution of purchases made by current BTC token holders within the price range of approximately 20%. It shows that the bulls could capitalize on the upcoming CPI Inflation data release to push BTC toward $32,000. 

But for that to happen, Bitcoin must first scale the $30,400 resistance level. The IOMAP chart below shows that 2.2 million current holders had purchased 976,780 BTC at the maximum price of $30,403.

If the CPI data release triggers a bullish BTC price momentum as it did around July 14, that resistance level could evolve into a larger accumulation zone. 

Hence, BTC could proceed to reclaim $32,000 before the bears get a chance to regroup. 

Bitcoin (BTC) Price Prediction | IOMAP data, Aug 2023
Bitcoin (BTC) Price Prediction | IOMAP data, Aug 2023. Source: IntoTheBlock

Conversely, the bears could invalidate the optimistic prediction if the BTC price drops below the $28,000 mark. However, 1.92 million addresses that bought 933,600 BTC at an average of $28,583 can trigger a rebound. 

But if that support level does not hold, the BTC price rally could be invalidated and retraced toward $27,500.

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Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

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Ibrahim Ajibade
Ibrahim Ajibade Ademolawa is an experienced On-chain research analyst who began his career in Commercial Banking. He has worked with several Web3 startups and financial institutions —analyzing technical concepts and spectacular events that link the DeFi and TradFi worlds. He holds a Bachelors’ Degree in Economics and is currently pursuing an MSc. in Blockchain & Distributed Ledger Technologies.
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