Here's how the CPI could cause the price of bitcoin to jump in June!

Bitcoin's volatility continues to captivate investors around the world, and recent economic developments in the United States may well determine its next major move. As expectations turn to the imminent release of inflation data, an intriguing correlation between the Consumer Price Index (CPI) and Bitcoin's fluctuations has come to light.

A lower CPI: the key to a new all-time high?

Markus Thielen, chief analyst at 10x Research, recently claimed that Bitcoin could reach a new all-time high if inflation in the United States, as measured by the Consumer Price Index (CPI), slows sufficiently. “ If inflation prints 3.3% or less, Bitcoin should reach a new all-time high,” he said in a report released on May 29. Thielen is referring to the upcoming release of CPI results by the U.S. Bureau of Labor Statistics (BLS), scheduled for June 12.

The CPI for May stood at 3.4%, down slightly from the previous month. However, this figure is still too high to allow a significant rise in Bitcoin. Thielen emphasizes that, in the two weeks leading up to the May earnings release, inflows into Bitcoin exchange-traded funds (ETFs) remained strong, in anticipation of a decline in inflation. He also noted that if CPI results are better than expected, momentum could weaken, as was observed earlier this year.

Since May 13, inflows into Bitcoin ETFs have been positive on a daily basis, with the highest inflow recorded on May 21, at $305.7 million. Thielen believes that Bitcoin price movements are not random, but are mainly influenced by critical factors like inflation. He adds that several instances this year have shown that higher-than-expected CPI results have led to declines in the price of Bitcoin. For example, on April 10, the CPI was printed at 3.5%, just 0.1% higher than expected, and a few weeks later, the price of Bitcoin fell 6.67% to $56,000.

The implications of the CPI on bitcoin

Markus Thielen explains that price movements are not random but are mainly influenced by critical factors like inflation. “ There are no 'random' movements in the price of Bitcoin; it all comes down to critical drivers, the main one being inflation,” he said.

Bitcoin exchange-traded funds (ETFs) launched in January also showed how investors respond to economic data. Despite massive inflows of $611 million on the first day, flows subsided when CPI results were higher than expected. Thielen attributes this to better-than-expected CPI results, which weakened Bitcoin in January and led to consolidation through March.

If the June CPI is lower than expected, it could boost investor confidence and spur a new wave of bitcoin buying. Lower inflation could not only support Bitcoin, but also improve the perception of digital assets as a hedge against inflation.