Bitcoin’s price took a hit earlier this week, dropping to $94,000 upon the release of the US Consumer Price Index (CPI) data for January. The data, published on Feb. 12, showed the YoY inflation and core CPI came in above expectations, showing that the inflationary pressures in the US failed to decrease.

While Bitcoin has historically reacted strongly to most previous CPI announcements, this was particularly significant given that it’s the first time CPI data was published under the new Trump administration. Bitcoin dropped nearly $2,000 within minutes of the announcement, shedding well over 2.5% before the end of the day.

The sharp drop shows the US market’s sensitivity to economic and political news. One of the ways to assess the US market sentiment is through the Coinbase premium index. The index tracks the difference in Bitcoin’s trading price on Coinbase relative to other global exchanges and serves as a proxy for US investor activity and demand. The index measures how much higher (or lower) BTC is trading on Coinbase compared to other global exchanges. When it is positive, US demand on Coinbase is outbidding prices elsewhere. When it dips below zero, it signals that US traders may be hitting the sell button more aggressively than global traders.

Data from CryptoQuant showed a drop in the index on Feb. 12, right before the CPI print, and the immediate aftermath once the data came out hot. Given that Coinbase is the largest on-ramp for retail and institutional investors in the US, we can assume that some traders were de-risking their positions in anticipation of potentially adverse macro news.

US traders were likely front-running the possibility of higher inflation, worried it might prompt a more hawkish stance from the Federal Reserve. In a “hot CPI” environment, traders worry the Fed may keep up or increase tightening measures, putting pressure on high-risk assets, including BTC. That worry seems to have materialized on Coinbase first—hence the negative premium.

There have been multiple other instances in January when the Coinbase premium index briefly turned negative. Comparing the drops in the index with Bitcoin’s price, we can see that they usually follow price volatility and macro uncertainty but are quick to recover once the immediate concern has faded. Looking at the broader picture, the index oscillates around zero, indicating that US trading sentiment often flips between risk-on and risk-off.

This shows how closely Bitcoin trades in step with the broader risk sentiment rather than being driven just by crypto-specific news. In the case of a surprise in the CPI, the negative index reading seems to indicate that at least part of the sell-off originated from US traders on Coinbase.

However, it’s important to note that no single metric can offer an infallible view of a market as decentralized as Bitcoin’s. At times, exchange-specific liquidity issues or large institutional flows can skew the index, making it seem as though the US market is collectively bearish or bullish when, in reality, the shift could simply be the result of one major player’s activity. Arbitrage opportunities can also emerge and close rapidly, so momentary spikes or dips in the index may reflect short-lived inefficiencies rather than genuine sentiment shifts.

Still, the correlation between the sharp drop in the index and Bitcoin’s price action after the inflation announcement reinforces the idea that many participants view Bitcoin’s trajectory through US monetary policy, especially when inflation data runs contrary to expectations.

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