Bitcoin experienced significant price volatility this week. It surged to a high of $122,000 during trading hours and then quickly retreated. At the time of writing, Bitcoin is trading at $119,117, having sharply declined from its previous peak.
Investors should carefully watch the market as the US Consumer Price Index (CPI) report approaches. This could potentially impact the direction of the cryptocurrency market.
Bitcoin Investors Showing Increasing Positive Outlook
In August, long-term Bitcoin holders' profit-taking (7-day Simple Moving Average or SMA) significantly slowed down. After recording one of the largest profit-taking periods in Bitcoin history in July, the consistent daily profit trend of over $1 billion has decreased.
The reduction in selling activity by long-term holders is contributing to a positive outlook on Bitcoin. As the market stabilizes, investors are showing confidence in the cryptocurrency's long-term potential.
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Bitcoin is currently benefiting from increasing interest, with new addresses growing by 15% over the past 10 days. The number of active addresses increased to 367,349, reaching a 9-month high.
This upward trend indicates that Bitcoin is gaining popularity among new investors and participants, strengthening overall market sentiment. Bitcoin's price momentum could be significantly influenced by the upcoming US CPI report. Ideally, a high CPI would lead to interest rate increases, making BTC and other crypto assets attractive inflation hedges. However, the situation is different this time.
CPI Impact on BTC Price
Bitcoin surged above $122,000 in the past 48 hours and is currently trading at $119,117, recording a monthly high. However, Bitcoin soon sharply declined to its current price.
Bitcoin is currently facing resistance just below $120,000. This has acted as a strong barrier in recent price movements, preventing the cryptocurrency from rising higher.
If the upcoming US CPI report shows higher-than-expected 2.8% YoY inflation, Bitcoin's price may enter an adjustment below this resistance level. This is because the Pearson correlation coefficient between BTC and US stocks is 0.76. In April and May this year, Bitcoin moved with the stock market under similar conditions, with low CPI leading to BTC price increases.
Recent trade wars have further complicated the situation, and the ideal definition has been proven exceptional this year. Cryptocurrency analyst Michael Van De Poppe shared a similar outlook in an interview with BeInCrypto.
"I don't think using historical data in 2025 makes sense. Also, there are data points suggesting selling in May and returning in September, but technically we've seen a strong market breakout since May," Michael said.
Therefore, if the CPI report maintains a lower 2.7% YoY instead of the predicted 2.8%, Bitcoin could break through the $120,000 resistance. A positive CPI report could pave the way for Bitcoin to reach $122,000 and potentially extend its rally to the all-time high (ATH) of $123,218.
