US inflation and Bitcoin price: is there a connection?

The CPI is based on about 94,000 price quotes, including prices for housing, goods and services, food and energy, medical care and transport, education, and more. About 23,000 retail and service establishments provide data to the Bureau of Labor Statistics (BLS). After that, the received information is processed, and an up-to-date report is generated and published monthly.

In July 2022, the Consumer Price Index hit a 40-year high. Regulators were forced to take measures to slow down inflation, resulting in the Fed raising its key interest rate at a faster pace. This increased the pressure on the markets but brought the desired result – inflation gradually declined.

Consumer Price Index for the last 10 years (INVESTING.COM)

Cryptocurrency Sensitivity

For most ordinary people and players in the financial market, the cryptocurrency sector remains high-risk, complex, and incomprehensible. Even though, the correlation between cryptocurrency and the stock market has only strengthened over the years.

After the release of the Bureau of Labor Statistics report, the index chart often shows greater volatility. In particular, markets may show momentum if inflation declines faster than expected. The reason is the expectation of a future reduction in the Fed’s key interest rate, which, in turn, accelerates the economy with “available” money in the form of cheap central bank loans. In a pessimistic scenario, some investors are trying to quickly get rid of their crypto assets.

BTC reaction to monthly index reports

Final words

The CPI should be used in conjunction with other indicators of US macroeconomic stability. Based on the level of inflation, you can predict further tightening or loosening of the Fed's regulatory policy, which will safeguard open futures transactions in times of high volatility. This will help in long-term investing or adjusting one's investment portfolio.