Bitcoin and CPI – Betting Against Consensus

👇1-10) Last Saturday (July 6), we recommended a tactical bullish position on Bitcoin ahead of this week’s CPI data when Bitcoin traded at $56,746. We anticipated that a rate cut rally could push Bitcoin near $60,000. Yesterday, Bitcoin rallied to $59,350 due to short covering ahead of the CPI, fulfilling our rally expectations.

👇2-10) Our bullish stance on Bitcoin in late 2022 and early 2023 puzzled many participants. Contrary to most economists' predictions, we expected a significant US inflation (CPI) decline from nearly 8% to about 3% by late 2023. During our presentations, we demonstrated how Bitcoin responded positively to lower inflation.

👇3-10) In January 2023, this scenario played out when Bitcoin rallied +5% on the CPI release day. Economists still expected a high inflation number, while traders were bearish. This was followed by another Bitcoin move of +6% the next day and another +5% afterward. As predicted, lower inflation set off the Bitcoin rally in 2023.

👇4-10) This week’s CPI report is complex as anticipation of a decline has already caused a short-cover rally of +5%. Trading on data releases and events requires a deep understanding of the always-shifting market expectations and changing positioning. An outsized move depends on the surprise factor AND how traders are positioned.

Bitcoin - bottoming out?

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