CPI surpassed expectations and triggered interest rate hikes. Why did Bitcoin buck the trend and strengthen?

According to Woofun AI, the probability that the Federal Reserve will start an interest rate hike cycle next week has risen sharply. The core driving force is that the CPI (Consumer Price Index) data released on Friday is significantly higher than market expectations. This sudden shift in macroeconomic fundamentals directly shattered the market's previous illusion of maintaining the current state of monetary policy, and changed interest rate hikes from “possible” to “almost a foregone conclusion.”

However, unlike the paradigm of 'interest rate hikes and negative risk assets' in traditional financial logic, the crypto market showed a counterintuitive resilience. Bitcoin prices did not rebound due to austerity expectations, but instead recorded an increase after the data was released. This divergence triggered the market to re-examine the underlying pricing logic.

Breaking down the details of the inflation data in depth, the core CPI rose 0.3% month-on-month in August, clearly exceeding economists' expectations of 0.2%, while the overall inflation rate rose 0.4% month-on-month and 3.4% year-on-year, all in line with previous forecasts.

This data follows a strong producer price index earlier this week, and also coincides with the European Central Bank's announcement of interest rate hikes. According to data compiled by Woofun AI, Bank of America (BAC.US) predicts that the Federal Reserve will raise interest rates by 25 basis points next week and is expected to raise interest rates by another 50 basis points before the end of the year. Fitch Ratings's Oulu Sonora put it bluntly that the latest inflation data makes “continuing to suspend interest rate hikes more and more difficult to justify”. Judging from the aggregation of institutional forecasts, hawkish positions have become the market consensus. Any operation that deviates from this path may cause sharp fluctuations, while interest rate hikes that meet expectations are viewed as a process of risk release.

In terms of market reaction, the price of Bitcoin rose to $78,600 after the report was released, up 1.5% within 24 hours, showing strong resistance to falling. Joel Kruger, a global market strategist at LMAX Group, pointed out that traders had a tendency to think that the Federal Reserve would raise interest rates long before the CPI was announced, and “most of the risks posed by hawkish policies are already reflected in the price.” Therefore, if the Federal Reserve acts as expected, the market reaction will be relatively moderate; conversely, if the central bank chooses to stay on hold, risk assets may rise sharply due to falling short of expectations. Matt Mena, a veteran cryptocurrency research strategist at 21Shares, further corroborates this view, pointing out that during the 30-day period where the core CPI was higher than expected, the average increase in Bitcoin was 2.13%.

Furthermore, the simultaneous rise in the price of Ethereum and SOL indicates that the funds are not leaving the crypto sector, but are being reallocated based on concerns about inflation and policy credibility.

Risk Dimensions chief investment officer Mark Connors believes that the simultaneous rise in the price of Bitcoin and gold is rooted in questions about the credibility of the policy. Previously, he anticipated that moderate inflation might allow Federal Reserve Chairman Kevin Walsh to keep interest rates unchanged, but Friday's data changed this situation. Connors pointed out that although US Treasury Secretary Scott Bessent increased the scale of long-term bond repurchases, US Treasury yields are still rising, indicating that investors are concerned not only about interest rates, but also about the risk of government debt and inflation getting out of control. In this context, Bitcoin has become an alternative asset against currency depreciation due to its immovable nature. Connors emphasized: 'We can't print oil, and Bitcoin can't be devalued. ' This logic explains why BTC can still be favored as a safe-haven tool in the shadow of interest rate hikes, and marks the evolution of its narrative from a simple risky asset to a macro-hedging tool.