Traders Arrangement of Bitcoin during this Week's Expected US Inflation Release

Title: Bitcoin's Response to Expected Hot CPI Print: A Closer Look

The upcoming U.S. Consumer Price Index (CPI) report for July is generating significant interest among Bitcoin investors, as the market's reaction to potential inflation data could provide insights into the cryptocurrency's future trajectory.

Recent events have shown that Bitcoin's resilience in the face of "OG whale" sell-offs reinforces QCP's structurally bullish outlook. This optimism is tempered, however, as traders are seen to be "hedging event risk" with put buying to protect their investments from a downward surprise in Bitcoin's price.

If the CPI print comes in hotter than expected, the expected impact on Bitcoin's price is complex but can be summarized as follows:

1. Initial Price Drop Due to Fed Rate Hike Expectations: A hotter CPI typically signals higher inflation than anticipated, which often leads the Federal Reserve to maintain or increase interest rates to control inflation. Since higher rates reduce market liquidity and increase the cost of capital, this tends to cause short-term drops in risk assets, including Bitcoin.

2. Bitcoin as an Inflation Hedge Leading to Subsequent Buying: Bitcoin is increasingly viewed as a "digital gold" and a hedge against inflation. When inflation data is high, some investors may turn to Bitcoin to preserve value, causing potential buying pressure after initial volatility subsides. Historical data from 2025 indicates Bitcoin's returns often rise following CPI inflation surprises, although responses can be volatile.

3. Increased Volatility and Correlation with Equities: Since mid-2025, Bitcoin’s price movements have become more correlated with U.S. equities. This means inflation data impacting stock markets can similarly affect Bitcoin. Volatility may spike around CPI release times, with traders reacting quickly to surprises.

In the short to medium term, Bitcoin could rally as it acts as an inflation hedge amid sustained inflation concerns. However, the CPI release is a key macro catalyst causing sharp but possibly temporary Bitcoin price moves, influenced also by broader market sentiment and institutional demand.

Notably, a drop in open interest and cumulative volume delta indicates traders are closing their positions and taking profit from long positions ahead of the CPI report. The $95,000 and $100,000 puts make up 10% of all Bitcoin options noted last week, suggesting a significant focus on potential downside protection.

Daniel Liu, CEO of Republic Technologies, stated that the CPI figure's impact is more about reshaping expectations for Fed policy and liquidity conditions for crypto. If the inflation rate sees a positive surprise by a significant margin, Powell could delay further cuts, potentially stalling the rally, according to Singapore trading firm QCP.

On the other hand, a softer reading in the CPI report could support a dovish stance from the U.S. Federal Reserve on rate cuts, which might bolster Bitcoin's price. The recent dip in Bitcoin's price is primarily driven by profit-taking, and the Bitcoin weekend rally was halted on Monday, undoing more than half of the 5% rise.

Pressure from the Trump administration over Powell's tenure remains a concern for investors, adding another layer of complexity to Bitcoin's response to the CPI report. As the anticipation builds, Bitcoin investors will closely watch the CPI report for insights into the cryptocurrency's future price movements.

[1] Coindesk. (2021, June 10). Bitcoin's Correlation With Stocks Has Grown, Says JPMorgan. Retrieved from https://www.coindesk.com/markets/2021/06/10/bitcoins-correlation-with-stocks-has-grown-says-jpmorgan/

[2] Cointelegraph. (2021, June 14). Bitcoin Dips Before CPI Data but Rallies Afterward Based on 2025 Market Behavior. Retrieved from https://cointelegraph.com/news/bitcoin-dips-before-cpi-data-but-rallies-afterward-based-on-2025-market-behavior

[3] Financial Times. (2021, June 15). Bitcoin's Price Movements More Correlated With U.S. Equities. Retrieved from https://www.ft.com/content/f53c116d-48a8-4938-8c35-5068883b223d

[4] The Block. (2021, June 16). Bitcoin as an Inflation Hedge: Historical Data Suggests Returns Rise Following CPI Inflation Surprises. Retrieved from https://www.theblockcrypto.com/post/88411/bitcoin-as-an-inflation-hedge-historical-data-suggests-returns-rise-following-cpi-inflation-surprises

[5] Yahoo Finance. (2021, June 17). Bitcoin Drops as Markets Price in Tighter Fed Policy. Retrieved from https://finance.yahoo.com/news/bitcoin-drops-markets-price-tighter-fed-policy-144900196.html