By examining the Bitcoin price, volatility index, and Coinbase premium index together in a single graph since January 10, 2024, it becomes evident that the Consumer Price Index (CPI) has been the primary driver of Bitcoin's price increase.

Key Observations:

Correlation between CPI and Bitcoin Price: Bitcoin's price closely follows the movements of CPI, rising with CPI increases and falling with CPI decreases (in general). This indicates that Bitcoin is perceived as a hedge against inflation, and investors adjust their perception based on CPI data.

Volatility Index and Price Impact: While rising volatility supports Bitcoin's upward momentum, sudden drops in volatility lead to price declines as well. The graph clearly demonstrates this pattern in five distinct instances.

Coinbase Premium Index: When the Coinbase premium index is above 0, it indicates that the Bitcoin price on Coinbase is higher than on other exchanges. This suggests that both individual inverstors and institutional investors prefer Coinbase and are actively buying Bitcoin on the spot market.

Conclusion:

Since January 10, 2024, CPI has been the most significant factor driving Bitcoin's price increase. While rising volatility reinforces the trend, sudden drops in volatility drag down the Bitcoin price as well. The Coinbase premium index above 0 indicates institutional interest in Bitcoin.

Written by burakkesmeci