Will This Week’s CPI Figures Keep Bitcoin On Track To $200,000?

Bitcoin could rise to $200,000 by 2025, analysts say, as markets look to key US inflation data and the pace of institutional capital flows.

December's consumer price index (CPI), scheduled for release at 8:30 a.m. ET Wednesday, is expected to show a 2.9% year-over-year increase and a 0.3% month-on-month increase, according to MarketWatch. Data.

Core CPI, which excludes food and labor, is forecast to rise 0.3% per month.

Expected CPI data is critical to understanding inflation and how it affects the Federal Reserve's monetary policy.

Low or stabilizing inflation could prompt the Fed to ease its high long-term interest rate stance, increasing the risk-averse environment for assets like Bitcoin.

If inflation is in line with expectations, it could reduce the rate of liquidity in financial markets, making risk assets more attractive to institutional and retail investors, strengthening Bitcoin's appeal.

On the contrary, persistently high inflation can slow monetary efficiency, reversing Bitcoin's upward trajectory. Data from CME FedWatch tool It indicates traders are divided on the Fed's rate cut direction for the year.

“The producer price index has entered into anticipation, although it is still rising; it has increased less than expected,” Ryan McMillin, chief investment officer of crypto fund manager Merkle Tree Capital, told Decrypt.

“We could see the same thing for the CPI on Wednesday. This may indicate that the dollar has finished, and risk assets will get some rest.”

That line is on the rise once Trump's cabinet is confirmed this week and comments from his team about plans to weaken the dollar and cut interest rates — not just short-term rates, but also longer-term issues like the 10-year Treasury note. Despite the Fed rate cut, McMillin added.

This may take some time to calm the equity markets, but Bitcoin and cryptocurrency are going to move up quickly as Trump's team publicly announces their pro-Bitcoin and crypto stance.

While some are predicting as many as two 25 basis point cuts, in line with the Fed's latest guidance, a large portion of traders now believe there will be no rate cut in 2025.

Recent strength in the U.S. labor market, with an unexpected 256,000 jobs in December, has raised concerns that inflation will remain above the Fed's 2% target, which could delay further easing and create uncertainty for riskier assets, including crypto.

A rough year ahead?

Depreciation aside, some still see further growth in the latter part of this year.

In its latest weekly report, CryptoQuant highlighted Bitcoin's potential to climb between $145,000 and $249,000 by the end of the year, supported by favorable macroeconomic trends, a Pro-Crypto American administration and historical patterns.

The report also indicated that institutional adoption is growing, with addresses of 100-1,000 BTC, adding $127 billion by 2024.

“Bitcoin is entering the final year of its four-year cycle, a period of historically significant price increases,” CryptoQuant wrote. Historical trends show that capital flows into Bitcoin could reach $520 billion by 2025, building on $440 billion by the end of 2022.

With a market price to real value ratio of 2.3, Bitcoin remains well below the temperature range of 3.8-4.0, indicating room for further growth. The ratio compares Bitcoin's market capitalization to its realized capitalization to help identify overbought or oversold conditions.

Concerns include a potential “news-in-the-news” phenomenon and weak retail participation linked to the US administration's pro-crypto policies, which could fuel anger.

Meanwhile, Wednesday's CPI data could have a significant impact on market sentiment, with deviations from expectations likely to affect the path of the Fed rate and the direction of Bitcoin, CryptoQuant warned.