Bitcoin is once again at the forefront of market discussions as investors await the release of the December Consumer Price Index (CPI) on Wednesday at 8:30 a.m. ET.

Analysts expect the CPI to show a year-over-year increase of 2.9% and a monthly rise of 0.3%, while Core CPI, which excludes volatile food and energy prices, is also projected to grow by 0.3% month-over-month.

This data is crucial for gauging inflation trends and assessing how they might influence the Federal Reserve’s monetary policy. A lower-than-expected CPI reading could provide a boost for Bitcoin by signaling the potential for monetary easing, while persistently high inflation may delay such measures, tempering bullish sentiment.

Bitcoin Reclaims $96,000 Amid Improved Sentiment

Following a turbulent start to the week, Bitcoin has rebounded, trading at approximately $96,580, a 5.8% increase over the past 24 hours, according to CoinGecko. The recovery coincides with reports that President-elect Donald Trump may issue a pro-crypto executive order upon taking office, further bolstering market sentiment.

Bitcoin’s price rebound also aligns with growing optimism about potential cooling inflation, which could prompt the Federal Reserve to adopt a less aggressive approach to interest rates.

Inflation Trends and Federal Reserve Policy

The CPI data is expected to influence how the Federal Reserve approaches its “higher for longer” interest rate stance. A cooler-than-expected inflation print could weaken the U.S. Dollar Index (DXY), signaling increased liquidity in financial markets.

• Bullish Scenario:
  If CPI matches or falls below expectations, it may support a risk-on environment, encouraging capital flows into assets like Bitcoin. Historical patterns suggest that a weaker dollar could enhance Bitcoin’s appeal to both institutional and retail investors.
• Bearish Scenario:
  If inflation comes in hotter than expected, it could reinforce the Fed’s commitment to higher rates, delaying potential rate cuts. December’s strong nonfarm payroll data (256,000 jobs added) has already fueled concerns about persistent inflation, creating uncertainty for risk assets, including crypto.

Analysts Weigh In on Bitcoin’s Trajectory

Near-Term Volatility Likely

Joe McCann, founder of crypto investment firm Asymmetric, noted that Bitcoin could face additional short-term pressure due to macroeconomic factors. “The dollar’s strength and the Fed’s cautious stance have been key headwinds,” he said, adding that Bitcoin’s price action is likely to remain range-bound until there’s greater clarity on inflation and policy direction.

Historical Parallels and Long-Term Optimism

CryptoQuant analysts highlighted Bitcoin’s historical four-year cycle, noting that the current phase typically precedes significant price increases. With a Market Value to Realized Value (MVRV) ratio of 2.3, Bitcoin remains well below the overheated zone of 3.8-4.0, suggesting room for further growth.

Prominent analyst Lark Davis also drew parallels to previous presidential inaugurations. “In 2021, Bitcoin dipped before Biden’s inauguration but rallied strongly afterward. History doesn’t repeat, but it often rhymes,” Davis remarked, suggesting a potential post-inauguration price surge.

Pro-Crypto Policies and Institutional Adoption

The anticipation surrounding Donald Trump’s inauguration has added another layer of complexity to Bitcoin’s outlook. Trump’s administration is expected to adopt crypto-friendly measures, including regulatory clarity and the establishment of a U.S. Bitcoin reserve.

Institutional interest remains robust, with large inflows into spot Bitcoin ETFs introduced by firms like BlackRock and Fidelity. This institutional participation enhances market liquidity and supports the argument for continued bullish momentum.

CPI’s Role in Bitcoin’s Short-Term Moves

Wednesday’s CPI release could act as a catalyst for Bitcoin’s price, with analysts pointing to a narrowing triangle pattern that signals an imminent breakout.

Markus Thielen, head of research at 10x Research, emphasized the importance of following the breakout regardless of its direction. “Expectations for CPI are higher, so a cooler inflation reading could trigger a Bitcoin rally,” Thielen said.

Outlook for 2025: Could Bitcoin Reach $200,000?

Looking further ahead, analysts maintain a bullish long-term outlook for Bitcoin. CryptoQuant predicts that favorable macroeconomic trends, regulatory clarity, and increased institutional adoption could push Bitcoin’s price to between $145,000 and $249,000 by year-end.

While short-term risks like inflation and monetary tightening persist, the broader narrative suggests that Bitcoin is well-positioned for substantial growth as liquidity returns to the market and pro-crypto policies take effect.