Bitcoin extended its rally this week after new U.S. inflation data came in slightly below expectations, giving investors a fresh dose of optimism. However, market analysts caution that despite the upbeat numbers, deeper structural risks still loom over the crypto market.
Bitcoin Gains as Inflation Eases
The U.S. Consumer Price Index (CPI) rose 3.0% year-over-year, narrowly missing forecasts of 3.1%. The softer reading — a sign that inflationary pressures may be easing — briefly pushed Bitcoin higher.
The world’s largest cryptocurrency climbed into the low-to-mid $111,000 range early Friday before easing back to around $110,500, according to data. Ether also gained ground, edging closer to the $4,000 mark.
Nic Puckrin, co-founder of The Coin Bureau, called the CPI print “the most impactful inflation report of the year,” noting that it clears some of the uncertainty created by the ongoing U.S. government shutdown.
“This report finally dispels some of the policy uncertainty,” Puckrin said. “It sets the stage for the Federal Reserve to continue its rate-cutting cycle beyond next week — exactly what risk assets have been waiting for to resume their rally.”
Puckrin added that if Bitcoin manages to break above $116,500, it could set up a push toward a new all-time high.
“As liquidity thins heading into the weekend, we could see a sharp move higher as investors rotate from gold into Bitcoin — provided no negative headlines emerge,” he said.
Market Strength Concentrated in Major Tokens
Following the CPI release, total crypto market capitalization saw a modest uptick. However, the gains were largely limited to major cryptocurrencies like Bitcoin and Ether, while smaller-cap tokens lagged behind.
Analysts Caution: “Proof-of-Conviction” Phase Not Over
Despite the short-term optimism, several analysts urged restraint. BRN’s Head of Research, Timothy Misir, described the current environment as a “proof-of-conviction phase,” where market conviction remains fragile.
Misir pointed out that options open interest remains near record highs, leaving dealers “short gamma” — a condition that can trigger outsized price swings if Bitcoin tests major liquidation zones, particularly around $114,000.
He also noted that long-term holders (LTHs) continue to distribute coins, offsetting some of the demand from new spot Bitcoin ETFs.
“Elevated options exposure and persistent LTH selling mean rallies can be amplified or reversed quickly,” Misir said.
At the same time, “Dolphin wallets” — those holding between 100 and 1,000 BTC — now control roughly 26% of circulating supply, after accumulating steadily throughout 2025. That cohort, Misir warned, could slow their buying, dampening momentum.
Mixed Signals in On-Chain and ETF Data
Spot Bitcoin ETFs recorded modest net inflows around the CPI release, led by substantial purchases into BlackRock’s IBIT fund. By contrast, Ethereum-based funds continued to see outflows, underscoring the mixed sentiment across crypto markets.
Two Paths Forward: Breakout or Pullback
Analysts now see two competing scenarios for Bitcoin’s near-term trajectory:
- Bullish Case: Continued ETF inflows and renewed retail rotation from gold could drive BTC past the $116,500 resistance — potentially reigniting a broader risk-on rally.
- Bearish Case: A macro shock, renewed ETF outflows, or heavy options-related selling could trigger sharp intraday declines and deeper consolidation.
Government Shutdown Adds New Uncertainty
Adding to the complexity, the ongoing U.S. government shutdown, now entering its fourth week, may delay key economic data releases. White House Press Secretary Karoline Leavitt warned that the Bureau of Labor Statistics may not be able to publish the October CPI report, marking a historic first.
Puckrin cautioned that such a data gap could dampen investor confidence and delay market-moving policy actions.
“If the shutdown continues into November, it will weigh on sentiment,” he said. “Not least because it means the crypto market structure bill and pending altcoin ETF approvals will likely be pushed back.”
The Bottom Line
Easing inflation has given Bitcoin some breathing room, and optimism is rising that the Fed could continue cutting rates — a move historically supportive of risk assets. Yet analysts agree that market stability is far from guaranteed. Between high derivatives exposure, wavering long-term holders, and political gridlock in Washington, crypto’s rally remains balanced on a fine edge.
