Will Bitcoin rally after the US CPI data is released tomorrow?

Bitcoin price saw a modest rebound on Wednesday after bulls successfully defended the $85k support range. Will it see further gains following the release of U.S. CPI data scheduled for tomorrow?

After falling to an intraday low of $85,427 on Dec. 16, Bitcoin (BTC) rebounded to an intraday high of $87,918 on Wednesday, morning Asian time. It has since backpedalled some of its gains and settled at $87,305 at the time of writing.

Bitcoin price rebounded shortly after the latest U.S. jobs data print came out stronger than expected. Notably, nonfarm payrolls increased by 64,000 in November, far above economists’ estimates of 45,000. Meanwhile, the unemployment rate rose to 4.6% in November, the highest since September 2021. 

While a strong labour market can provide the Fed with more room to focus on inflation control, analysts see the growing unemployment rate as a concern that could likely lead the Fed to introduce more rate cuts, as the central bank prioritizes supporting job creation to achieve its maximum employment mandate. Growing expectations of a Fed rate cut are typically bullish for Bitcoin and other major cryptocurrencies.

The bellwether has also benefited from a potential short squeeze that occurred as short traders were caught off guard by the sudden move. Data from CoinGlass shows that around $38 million worth of short positions were liquidated in the past 24 hours, compared to $23.5 million from traders going long.

Investors are now closely awaiting the release of the U.S. CPI report set to be released tomorrow, Dec. 18, at 8:30 AM ET. Economists expect headline CPI to rise to 3.0% – 3.1 over the previous year, with Core CPI expected to sit around 2.9% – 3.1%.

For context, a hotter print could lead the Federal Reserve to pause rate cuts in January. Such a development could likely lead Bitcoin price to see some downside pressure ahead.

At its latest meeting, the Fed Chair has already hinted at a more conservative outlook for 2026.

Another major downside catalyst is the upcoming Bank of Japan interest rate decision set to come on Friday. According to Polymarket data, markets are pricing a 98% probability of a 25 bps hike on Dec. 19. This would be the benchmark rate reaching 0.25% for the first time in over 11 months, as inflation remains above 2%.

If the BoJ hikes rates while the Federal Reserve is cutting them, it could narrow the yield differential (the interest rate gap) between the two countries and trigger a massive unwinding of the yen carry trade.

Additionally, because Japanese institutional investors are the largest foreign holders of U.S. Treasury bonds, rising rates in Japan could lead to a large-scale repatriation of capital as they sell their U.S. holdings to invest in higher-yielding domestic Japanese bonds.

Bitcoin and most altcoins have historically dropped drastically each time the BoJ hiked interest rates.

“The unexpected strength in the November jobs report […] presents a short-term headwind for Bitcoin. However, the accompanying rise in the unemployment rate […] creates a mixed signal,” David Hernandez, crypto investment specialist at 21shares, told crypto.news.

“Ultimately, the strong payroll figure momentarily cools the rally by delaying the pivot to monetary easing. While heightened volatility is expected, the long-term narrative for Bitcoin remains intact […] This jobs beat is a temporary tactical challenge, not a strategic threat,” Hernandez added.