CPI Shock: Why the Initial Bitcoin Rally Reversed and What It Means for Crypto Prices Next

• Core inflation readings came in stickier than expected, sparking a hawkish shift.
• Fed rate hike odds on Polymarket jumped from around 60% to above 85% overall.
• Bitcoin swung nearly $5,000 within 90 minutes following the CPI release today.

Bitcoin’s reaction to Thursday’s CPI report was a textbook positioning trap. Headline inflation held at 3.4% year-over-year, matching expectations and triggering an immediate relief rally across Bitcoin, crypto broadly, and US equities. That optimism unwound almost as fast as it appeared.

However, monthly CPI rose 0.4%, core CPI rose 0.3%, and core services excluding housing jumped 0.5%. That shift, not the headline number, flipped the market’s read on the Fed.

Rate Hike Odds Jumped Fast

Polymarket’s probability of a 25 basis point Fed hike surged from around 60% to above 85% following the data. Treasury yields moved higher …

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