Bitcoin prices hit early this week, dropping to $94,000 with the release of US Consumer Price Index (CPI) data in January. Data released on February 12 shows that year-on-year inflation and core CPI have exceeded expectations, indicating that US inflation pressures did not decrease.
Bitcoin has historically responded strongly to most previous CPI announcements, especially considering it was the first time that CPI data has been made public under the new Trump administration. Bitcoin dropped nearly $2,000 within minutes of the announcement, well over 2.5% by the end of the day.
The sharp decline indicates the sensitivity of the US market to economic and political news. One way to assess sentiment in the US market is the Coinbase Premium Index. This index tracks the difference in Bitcoin trading prices at Coinbase compared to other global exchanges and acts as a proxy for the activities and demand of US investors. The index measures the degree of BTC that BTC is traded (or lower) on Coinbase compared to other global exchanges. If that is positive, US demand for Coinbase is outweighing prices elsewhere. Below zero indicates that US traders may be more aggressively pressing the sell button than global traders.
Data from Cryptoquant dropped the index on February 12th, just before CPI printing, reducing the aftermath immediately after the data heated up. Given that Coinbase is the biggest on-ramp for US retail and institutional investors, it can be assumed that some traders are releasing their position in anticipation of potentially unfavourable macro news.
US traders were likely at the forefront of higher inflation potential, fearing it would spur a hawkish stance from the Federal Reserve. In a “hot CPI” environment, traders are concerned that the Fed may maintain or increase deadlines and put pressure on high-risk assets, including BTC. That concern appears to have been realized at Coinbase first. That’s why it’s a negative premium.
In January there were several other instances where the Coinbase Premium Index was temporarily negative. Comparing the index decline with Bitcoin prices, we can see that while it usually follows price volatility and macro uncertainty, it recovers quickly after immediate concern fades. Looking at the wider image, the index vibrates around zero, indicating that US exchange sentiments often flip between risk-off and risk-off.
This shows broader risk sentiment and how Bitcoin trades closely rather than being driven solely by crypto-specific news. In the case of surprises at CPI, the reading of the negative index appears to indicate that at least part of the sale came from Coinbase’s US traders.
However, it is important to note that no single metric of a decentralized market like Bitcoin can provide a non-fall view. Sometimes exchange-specific liquidity issues and large institutional flows can distort the index, and in fact, the shift could be simply the result of one major player’s activity, the US The market seems as if overall bearish or bullish. As arbitrage opportunities can also emerge and close quickly, temporary spikes and dips in the index may reflect short-lived inefficiencies rather than genuine emotional changes.
Still, the correlation between the sharp decline in indexes after inflation announcements and Bitcoin price action has led many participants to look at Bitcoin’s trajectory through US monetary policy, especially when inflation data is against expectations. It reinforces the idea that you are.
Cryptoslate first appeared in the rising CPI data that triggered a particular sale among US traders.
