Bitcoin Dips 5.4% as US Inflation Rises 2.7% Year-over-Year

Bitcoin (BTC) experienced a dip following the release of the June US Consumer Price Index (CPI) data, which indicated a rise in inflation for the second consecutive month. The headline CPI reached 2.7% year-over-year, the highest since February, matching expectations but up from 2.4% in May. Core CPI also increased to 2.9% annually, slightly below forecasts of 3%. Overall CPI rose 0.3% month-over-month, the sharpest gain in five months, with core inflation up 0.2%.

The data highlighted that inflation remains persistent, particularly in sectors such as food and transportation, while shelter prices have only marginally decreased. Markets responded cautiously, and the US Dollar Index (DXY) sharply rose to 98.5, up 2.1% in July. The mixed reception of the CPI data offered some relief with the expected core figures, but rising headline inflation dampened hopes of a dovish pivot at the July Federal Open Market Committee meeting. According to CME FedWatch, futures pricing still favors a 54.3% chance of a September cut, which could attain further confirmation from this week’s Producer Price Index (PPI) data.

Should the PPI be softer than expected, Bitcoin may regain control above $120,000. However, a hotter PPI print could trigger another pullback between $115,000 and $110,000. While macroeconomic uncertainty lingers, Bitcoin remains well-positioned in a broader uptrend, but this week’s data could define whether the next move is a breakout or breakdown.

Bitcoin’s short-term outlook is mixed. After surging to a new yearly high of $123,218, Bitcoin retraced sharply to $116,500 on Tuesday, neutralizing overleveraged positions and resetting the market. For bulls, the key zone to reclaim now lies between $119,250 and $120,700, an area of sell-side imbalance. A clean breakout above this range would signal renewed bullish momentum and open the door for fresh highs beyond $123,000. However, a deeper correction appears more probable in the short term. Bitcoin could revisit the fair value gap between $113,700 and $115,300, a zone aligned with the 200-day EMA, which offers dynamic support. A bounce here would support the continuation of the broader uptrend. If selling pressure intensifies, BTC may retest the former all-time high around $112,000 before resuming its upward trajectory.

Irrespective of short-term volatility, the long-term market structure indicates that all Bitcoin dips are potential buy opportunities. Crypto trader Magus noted on X that BTC around the $117,000 is a “gift,” underlining the current strength of the rally. Likewise, anonymous investor Jelle expected BTC to chop between $116,000 and $118,000 before it recaptures a position above $120,000.