Bitcoin surged to near $115,000 on Thursday after the release of fresh United States inflation data, as traders debated whether the flagship cryptocurrency would retest support or accelerate into price discovery. While the Consumer Price Index (CPI) came in broadly in line with expectations, market reactions highlighted both optimism for higher levels and caution about potential short-term dips.

CPI Print Matches Forecasts, Boosting Rate-Cut Bets

Data from the US Labour Department showed that CPI rose 2.9% year-on-year in August, matching market forecasts and up from July’s 2.7%. The Producer Price Index (PPI), released a day earlier, surprised markets by cooling sharply to 2.6% compared with expectations of 3.3%.

The softer inflation profile reinforced speculation that the US Federal Reserve could begin easing monetary policy as soon as next week. Markets are now pricing in a strong probability of a 25-basis-point rate cut at the Fed’s 17 September meeting, with some analysts even pointing to an outside chance of a 50-basis-point reduction. According to trading resource The Kobeissi Letter, markets have already priced in 75 basis points of cuts by year-end.

Despite CPI being at its highest level since January, the bigger surprise came from US labour market data. Jobless claims jumped to 263,000, the largest reading since October 2021 and well above the expected 235,000. The combination of weak labour figures and a cooling PPI strengthened the case for monetary easing, bolstering risk assets such as equities and cryptocurrencies.

Bitcoin Pushes Past $114,500

Bitcoin reacted swiftly to the CPI release. Data from TradingView showed BTC/USD spiking to $114,571, its highest level since 24 August. Although the pair briefly slipped back to $113,823, traders saw the reclaim of $113,500 as a key short-term development.

Popular trader Jelle commented on X (formerly Twitter):
“PPI much lower than expected, CPI as expected. Conclusion: inflation not as bad as feared, bring on the rate cut later this month. News now behind us, time to resume the scheduled programme: higher.”

Similarly, analyst BitBull highlighted that flipping $113,500 from resistance to support opened the door for Bitcoin to rematch its all-time highs.

However, traders also flagged warning signs. Liquidity data showed around 2,000 BTC worth of sell orders near $114,000, suggesting a risk of liquidations before further upside.

Diverging Trader Views: Higher or One More Dip?

While some commentators see Bitcoin gearing up for a move into the $120,000 liquidity zone, others expect a short-term correction. Trader Skew noted that the market might attempt to trap and liquidate longs that entered during the CPI spike, predicting “one more liquidation before higher.”

Investor Ted Pillows drew parallels with past CPI releases, pointing out that Bitcoin has often rallied before inflation data only to dump shortly after. “In the last three CPI data releases, Bitcoin rallied before CPI data and dumped right after the release,” he warned, hinting at a potential repeat of the pattern.

This split in opinion underscores the uncertainty facing traders in the days leading up to the Fed meeting. While the macro backdrop appears supportive of risk assets, the heavy resistance around $114,000–$115,000 may not be overcome without another test of support levels.

Key Levels to Watch

Analysts at Bitunix highlighted $114,000 as the main resistance zone, with the potential for a short squeeze if BTC can sustain a break above it. Such a move could accelerate momentum towards $115,000 and beyond.

On the downside, $111,000 remains the first major support, with a deeper liquidity pocket between $108,500 and $109,000. A stronger-than-expected dollar rally or delayed rate-cut expectations could trigger a retest of these levels.

With the inflation data now in the books, the focus turns squarely to the Federal Reserve’s decision on 17 September. The outcome will likely set the tone not just for Bitcoin but for broader risk sentiment heading into the final quarter of 2025.

A Market at a Crossroads

Bitcoin’s sharp reaction to the CPI data illustrates the cryptocurrency’s heightened sensitivity to macroeconomic indicators, particularly those influencing Federal Reserve policy. The dovish tilt in both inflation and labour market data strengthens the case for rate cuts, which typically support risk assets.

Yet, caution lingers. The heavy liquidity around $114,000 and historical patterns of post-CPI volatility leave room for a shake-out before further gains. Whether Bitcoin consolidates above support or retraces for another liquidity grab will likely depend on Fed Chair Jerome Powell’s messaging next week.

For now, the market is finely balanced between bullish momentum and tactical caution, a dynamic that could define Bitcoin’s path towards, or away from, the $120,000 mark in the days ahead.