Inflation Data Shatters Illusions, Why Is the Crypto Market Rising Counterintuitively?

Inflation data exceeding expectations has made a Federal Reserve rate hike almost a foregone conclusion, yet the crypto market has not followed traditional logic by pulling back, instead demonstrating strong resilience. Behind this divergence lies the evolution of Bitcoin’s narrative from a risk asset to a macro hedging tool, as well as the institutionalization of the crypto market’s operating logic. Volatility characteristics are increasingly aligning with Wall Street’s trading schedule, and the divergence between leading coins and long-tail assets further confirms this trend. For trading institutions, identifying changes in risk periods, optimizing hedging strategies, and managing capital have become core issues in the crypto market’s convergence toward the traditional financial architecture.

The probability of the Federal Reserve launching a rate hike cycle next week has risen substantially, with the core driver being Friday’s CPI data, which came in significantly above market expectations. August core CPI rose 0.3% month-on-month, exceeding economists’ forecast of 0.2%, while headline inflation rose 0.4% month-on-month and 3.4% year-on-year. This data followed a strong producer price index release and coincided with theEuropean Central Bank’s announcement of a rate hike. Bank of America (BAC) predicts the Fed will raise rates by 25 basis points next week and expects another 50 basis points before year-end. Fitch Ratings’ Olu Sonola said bluntly that the latest inflation data makes “continuing to pause rate hikes increasingly difficult to justify.” The hawkish stance has become a market consensus.