Sticky CPI Caps Bitcoin, But the Treasury Is the Bigger Story

Inflation removed the near-term catalyst

The latest CPI print gave Bitcoin little to work with. Headline inflation landed broadly in line with expectations, while core came in marginally firmer than anticipated. Rather than handing the Federal Reserve room to ease, the data raises the probability of a September rate hike and reinforces the risk that policy stays restrictive for longer.

That is an immediate headwind. The market had been positioning for softer inflation as one of the catalysts for a sustained break above US$80k, and the print did not deliver it.

Flows turned with sentiment

Positioning followed. After around US$1.3B of inflows into digital asset investment products last week, this week has seen US$243M of outflows so far. With CPI failing to provide a dovish catalyst, near-term upside looks constrained. A convincing move through US$80k needs softer economic data, a more dovish Fed, or another policy catalyst.

The buyback programme is not working

The more consequential development sits in the Treasury market. The expanded bond buyback programme has failed to materially suppress long-term yields, despite larger purchases at the long end of the curve. It may be supporting liquidity, but its inability to lower borrowing costs shows the scale of the underlying pressure. Fiscal concerns, elevated inflation and a stubbornly high term premium continue to dominate the effect of the purchases.