Observing the cryptocurrency trading market reveals an interesting phenomenon: whenever U.S. CPI data is released, the price movements of crypto assets often experience sharp fluctuations. Last week, the CPI year-over-year increase was 3.2%, exceeding market expectations by 0.1 percentage points. Bitcoin rapidly dropped 3000 points on that day, then rebounded by 2000 points. Many traders suffered losses in this wave of operations, with the result of chasing gains and selling at lows leading to being trapped.

So, the question is: why does inflation data have such a significant impact on the crypto market? The logic behind this is actually not complicated. Inflation data is a barometer for traditional financial markets, directly influencing the Federal Reserve's policy decisions. The direction of the Fed's monetary policy determines the overall market liquidity—higher inflation data makes the Fed more inclined to raise interest rates and tighten liquidity, putting risk assets like Bitcoin and stocks under pressure; conversely, lower inflation data may prompt the Fed to release liquidity, giving risk assets a rebound opportunity. This is the fundamental logic of macro asset pricing.

However, there is a detail worth noting: the crypto market's sensitivity to inflation data is much higher than that of traditional markets. According to historical data from 2021 to 2024, when CPI exceeded expectations by 0.2 percentage points, Bitcoin's average decline on that day reached 4.1%, while the S&P 500's average decline was only 1.3%. Conversely, when CPI was 0.2 percentage points below expectations, Bitcoin's average increase was 5.8%, and the S&P 500's was 2.1%.

Why does this difference occur? The key lies in market composition. Crypto market participants are mainly retail investors and small to medium-sized institutions, whose operations tend to be more aggressive and react more quickly. Institutional investors may hedge and manage risks, but retail and small institutions usually follow market hotspots directly, which amplifies price volatility.

For ordinary traders, understanding this correlation can help us better avoid risks. The fluctuations before CPI releases often contain opportunities, but it is also essential to have a clear understanding of one's risk tolerance.