The impact of the US July CPI data released tonight on the cryptocurrency market can be analyzed from the following key dimensions, combined with current market expectations and historical patterns, its transmission path and potential outcomes have become quite clear:

I. Data Expectations and Market Pricing

According to authoritative forecasts, the year-on-year growth rate of July CPI is expected to remain in the range of 2.7%-2.8%, with core CPI possibly reaching 3.0%. This expectation shows a slight rebound compared to the previous value, mainly reflecting the transmission effect of tariffs on the prices of imported goods, such as significant inflationary pressure in categories like furniture and clothing. The market has partially digested this expectation; however, if actual data deviates (e.g., core CPI breaks 3.2%), it may trigger a repricing of the Federal Reserve's policy path.

From the interest rate futures market, the CME FedWatch tool shows that the current market pricing probability for a 25 basis point rate cut in September has reached 88.9%, even implying a possibility of a 50 basis point rate cut in October. This high expectation makes the 'marginal changes' in CPI data particularly crucial: if the data is below expectation, it may reinforce rate cut expectations, pushing up cryptocurrency valuations; conversely, if the data exceeds expectations, it may lead to a withdrawal of leveraged funds, resulting in a price correction.

II. Historical Patterns and Market Structure

The correlation between cryptocurrencies and traditional financial markets is strengthening. Taking the market reaction after the release of July 2025 CPI data as an example, Bitcoin retraced from $123,000 to $115,700 within 24 hours after the data release, a decline of 6%, while the Nasdaq index fell by 2.3% during the same period. This synchrony indicates that the impact of CPI data on risk assets transmits to the crypto market through the path of 'liquidity expectations → fund flows → price fluctuations'.

Current market structure presents two major risk points: first, Bitcoin's MVRV-Z score has risen to 2.8, above the historical 90th percentile, indicating a high valuation; second, the open interest (OI) in the cryptocurrency futures market is at a historical high, with Bitcoin's open interest exceeding $4 billion, and the funding rate remains positive, suggesting crowded long positions. If CPI data triggers sharp volatility, it may lead to a chain liquidation, exacerbating market fluctuations.

III. Geopolitical and Policy Overlay Effects

In addition to CPI data, the current market also faces multiple external variables:

Internal Fed Game: Vice Chair Bowman publicly supports three rate cuts within the year, while San Francisco Fed President Daly and other officials emphasize the need to 'observe inflation persistence'. This divergence may amplify market volatility following the release of CPI data.

Geopolitical risks intensifying: Trump and Putin are scheduled to meet on August 15 to discuss the Russia-Ukraine conflict. Although the timing is after the release of CPI data, the market may react in advance to geopolitical risk premiums. Historical cases show that sudden geopolitical events often first trigger panic selling, followed by stabilization due to a return of safe-haven demand.

Regulatory Policy Expectations: If the US House of Representatives progresses on the (GENIUS Act) in the near term, it may provide a clear regulatory framework for stablecoins and digital assets, forming a short-term positive.

IV. Scenario Simulation and Response Strategies

Scenario 1: Data Exceeds Expectations (Core CPI > 3.2%)

Direct Impact: The dollar index may jump by 1.5%-2%, the yield on 10-year US Treasury bonds may rise by 20-30 basis points, and the Nasdaq index may fall by 3%-5%.

Cryptocurrency Market Reaction: Bitcoin may test the $118,000-$117,300 range, while Ethereum tests the support levels of $3,170 and $4,070. High-leverage long positions may face mass liquidation, with 24-hour liquidation amounts possibly exceeding $1 billion.

Response Strategy: Short-term traders may consider establishing put options above $118,000 while setting stop-loss protections; long-term holders need to monitor on-chain indicator changes, such as if the Bitcoin inventory on exchanges drops below 2.1 million, which may form a temporary bottom.

Scenario 2: Data Meets Expectations (Core CPI=3.0%)

Direct Impact: The market may exhibit characteristics of 'buying the expectation, selling the fact', with the dollar index slightly retreating and US stocks maintaining volatility.

Cryptocurrency Market Reaction: Bitcoin may fluctuate in the $116,000-$120,000 range, while Ethereum oscillates around $4,000. Altcoins may show differentiation, with projects that have clear technological upgrades (such as zkSync ecosystem tokens) potentially outperforming the broader market.

Response Strategy: It is advisable to pay attention to changes in funding rates in the derivatives market; if the rate turns from positive to negative, it may indicate that short-selling forces are strengthening. At the same time, a straddle options strategy can be deployed to capture opportunities from volatility expansion.

Scenario 3: Data Below Expectations (Core CPI < 2.8%)

Direct Impact: The dollar index may fall by 1%-1.5%, the yield on 10-year US Treasury bonds may decline by 15-20 basis points, and the Nasdaq index may rise by 2%-3%.

Cryptocurrency Market Reaction: Bitcoin is expected to break through the historical high of $123,300, while Ethereum may test the resistance level of $4,500. Institutional funds may accelerate inflow, with the Grayscale Bitcoin Trust premium rate possibly rebounding from the current -3% to +5%.

Response Strategy: Short-term traders can establish long positions below $118,000, targeting $125,000; long-term holders may consider staking ETH for returns while also paying attention to liquidity mining opportunities in Layer 2 projects.

V. Key Observational Indicators

Market Sentiment Before Data Release: Market positions can be anticipated through indicators such as the cryptocurrency fear and greed index (current value 72, in the greed zone) and social media heat (discussion volume on the #CPI topic).

Immediate Response of the Dollar and US Stocks: If the dollar index fluctuates more than 0.8% or the Nasdaq index fluctuates more than 2% within 30 minutes after the data release, be wary of a chain reaction.

On-chain Fund Flows: Pay attention to the transfer dynamics of Bitcoin 'whale addresses' (holding over 1,000 BTC); if large amounts are transferred to exchanges, it may indicate increased selling pressure.

In conclusion

Tonight's CPI data will become a significant watershed for the cryptocurrency market. Although the current market has partially digested rate cut expectations, the 'marginal changes' in data may still trigger severe volatility. Investors need to be wary of the risks brought by high valuations and high leverage, while also paying attention to potential catalysts from geopolitical situations and regulatory policies. It is recommended to adopt a 'light position trial and error + dynamic hedging' strategy to capture structural opportunities while controlling risks.