Bitcoin does not respond to positive CPI and PPI news: why?

Despite better-than-expected US inflation figures, a real Bitcoin rally is still not materialising. The price currently stands at $63K, down 1.5% in the past 24 hours. Analysts at CryptoQuant note that spot market demand is too weak to push the price higher, while the number of leveraged positions remains high.

Bitcoin is available at OKX and Bybit.

In brief:

• Bitcoin is not reacting to positive CPI and PPI figures, even though such macro news usually pushes the price up.
• The Coinbase Premium Index has been in the red for months, indicating weak demand from the US spot market.
• High leveraged positions combined with thin liquidity increase the risk of a further price decline.

Coinbase Premium Index shows continued weakness

An analysis based on the Coinbase Premium Index shows that US buyers have been less active than expected for some time. The index, which measures the difference between the Bitcoin price on Coinbase and other exchanges, has been predominantly red for months. This means that the price on Coinbase is structurally lower than elsewhere, pointing to limited demand from institutional and US retail investors.

Normally, positive macro figures, such as lower inflation via the CPI and PPI, create buying pressure on the spot market. This has not materialised now. The CryptoQuant analysis states that the spot market simply shows too little volume to set an upward move in motion.

Leveraged positions pose additional risk

Besides the weak spot market demand, there is another concern: the number of leveraged long positions remains high. Traders are thus using borrowed money to bet on a Bitcoin rise, but the price is not responding. This creates an unstable situation in which thin liquidity and little organic buying pressure combine with a market full of speculative positions.

If the price still fails to respond to positive news, the chance of these leveraged longs being stopped out grows. A chain reaction of forced selling could then put further pressure on the price. Bitcoin ETFs are already showing outflows, further strengthening the picture of waning interest. Analysts warn that as long as real buying pressure from the spot market fails to materialise, a sustainable rally is difficult to achieve.