The US December CPI data has been released, and this time the figure is 2.70%. For many in the crypto world, it's like a weather forecast — you need to understand it to judge whether the weather will be sunny or stormy next.

**What exactly is CPI?**

CPI stands for Consumer Price Index, in plain language, it’s a barometer of whether Americans’ daily expenses like groceries, gas, and rent are going up or down. When inflation rises, the Federal Reserve considers raising interest rates; when inflation falls, there’s room to cut rates. This logic has a huge impact on the crypto market.

**The transmission chain is actually quite simple**

Federal Reserve raises interest rates → US dollar becomes more valuable, wallets tighten → Investors sell BTC and ETH, switch to US Treasuries (after all, yields are obvious)

Federal Reserve cuts interest rates → US dollar becomes less valuable, money becomes more relaxed → Investors might "bet" on cryptocurrencies (why? Because savings in banks yield little)

**Two possible scenarios for this CPI**

Scenario 1: Market expected 3%, but the result is 2.7% → "Inflation unexpectedly cools down"

The logical trend is this — inflation drops, indicating the US economy isn’t as hot, price pressures ease, and the Fed has the confidence to cut rates. How will the crypto market react? In the short term, the market will think "rate cuts are coming faster," dollar liquidity loosens, and a bunch of funds withdraw from US Treasuries, flowing into high-risk assets like BTC and ETH. Altcoins will follow the main coins’ lead, with a high probability of rising together.

Scenario 2: Market expected 2.5%, but the result is 2.7% → "Inflation is a bit stubborn"

This is troublesome — inflation didn’t fall but rose, indicating the US economy is still somewhat hot, and the Fed might need to keep interest rates high or even hold steady. The crypto market’s reaction? Capital runs away. Funds withdraw from cryptocurrencies into dollars and US Treasuries because high interest rates make dollar deposits more attractive. The crypto market will likely adjust, and previously surging altcoins may see sharper declines.

**In summary**

CPI data is like a weather vane for the crypto market. Whether it’s a surprise positive or negative, it directly determines the short-term flow of funds. Understanding this logic helps you view market fluctuations more rationally.