Bitcoin (BTC) is having one of those days where good news turns into a head fake. The cryptocurrency rallied to $89,000 Thursday morning after inflation data came in cooler than expected, only to give back all those gains and settle back around $86,000 by midday.
Inflation Surprises to the Downside
The trigger was November's core CPI print, which fell to 2.6% year-over-year, the lowest level since March 2021. Market commentator The Kobeissi Letter called it "a sharp downside surprise versus expectations" and one of the largest inflation decelerations since 2023.
Rate-cut expectations jumped following the release, though markets still aren't pricing in any Fed move for January. Here's the catch: while inflation is slowing, prices aren't actually falling. Cumulative inflation since 2020 now sits at 25.2%, keeping pressure on consumers elevated.
Risk assets loved the initial headline. Bitcoin popped, and the S&P 500 (SPY) climbed to within 2% of record highs as investors started pricing in potential Fed leadership changes, fiscal stimulus, and what could be a volatile but opportunity-rich 2025. Then the enthusiasm faded. Bitcoin retreated to $86,000, and the index fell back below 6,800 points.
What Traders Are Watching Now
Michael van de Poppe said the CPI miss strengthens the disinflation narrative and is a clear tailwind for risk assets. With the Bank of Japan rate hike largely priced in, conditions may be forming for renewed risk-on momentum, including upside for Bitcoin.
Crypto trader KillaXBT wasn't as optimistic, noting that Bitcoin fully retraced its post-CPI rally and erased initial gains despite the bullish data. After banking 25% profits, remaining exposure now risks a breakeven stop. If hit, focus shifts to $83,000 as the next key level.
Altcoin Sherpa thinks Bitcoin is near a local bottom, with downside likely capped in the $75,000 to $80,000 range. Fundstrat's Tom Lee added that the disinflation surprise boosts the odds of a year-end risk rally, supporting further upside across equities and crypto, including Bitcoin and Ethereum.
So Bitcoin got sold at $90,000 once again. Whether that's a ceiling or just a pause before the next leg up depends on who you ask.