Bitcoin: How did BTC react to U.S. inflation cooling down?

To understand what lies ahead, it’s crucial to first look back.

Q4 has upended market expectations. What was supposed to be a “seasonal tailwind” for Bitcoin [BTC] ended up being its weakest quarter of 2025, with BTC down 23%, erasing over 60% of the gains from Q2 and Q3.

The result? Optimism shook, leveraged traders flushed, support levels cracked, and fear spiked. Notably, even with BTC still about 30% off its $126k early-October peak, broad “dip buying” hasn’t really kicked in.

In short, the market has swung from optimism to caution.

And yet, Tom Lee’s BTC call hasn’t budged. In a recent interview, he projected a new all-time high for BTC before the first month of 2026. That brings up the big question: What “exactly” lies ahead for the crypto market?

Looking at recent macro data, his call isn’t completely out of the blue.

Given this context, then, could Bitcoin finally hit its historical Q1 trend this time, with the quarter averaging a 50% ROI and historically ranking as the asset’s second most bullish period?

U.S. inflation hits multi-year lows

Beyond the charts, Q4 surprised on the macro front too.

Even after back-to-back Fed rate cuts, Bitcoin barely moved. The Federal shutdown clearly kept investors cautious, with Open Interest in check. In short, traders weren’t chasing greed, and sentiment stayed muted.

However, now, with the shutdown behind us, November’s CPI report is back in focus. Notably, core inflation has dropped to 2.6%, the lowest since April 2021, while the overall CPI came in at 2.7% versus 3.1% expected.

On the technical side, this puts U.S. inflation close to the Fed’s 2% target.

Notably, the market is already reacting: BTC jumped 2.93% intraday, clearly shrugging off FUD around the BOJ rate hike. Riding this “break”, Ark Invest quickly moved into crypto stocks, hinting at renewed institutional interest.

Overall, the cooling inflation report has given the market a new spark. Will it hold? With Q4’s 23% bleed behind us and most FUD cleared, it looks like Bitcoin could be forming a solid base to repeat its typical Q1 bullish streak.

Final Thoughts

• Bitcoin’s Q4 shakeout sets the stage for early 2026, with BTC down 23%, market sentiment cautious, and a potential base forming for a strong Q1 rally.
• Cooling U.S. inflation, now near the Fed’s 2% target, is already sparking market moves, signaling early 2026 upside potential.