If the CPI prints another small decrease during the next report, both legacy and cryptocurrency markets could surge to new all time highs. But to play the devil's advocate, isn't the sudden change of mood to extreme bullishness also inflationary?
I wouldn't call this bullishness because it is still small and only too soon to say. The impact of a 0.1% decrease is not significant enough to bring all the money that went out of the market, back to the market and create a rally to reach ATH.
Also the problem is not inflation alone, the actual problem is still as it has been so far: a combination of both inflation and recession.
People are earning less money + have to spend more money on goods and services + and at the same time pay higher interest on their loans. The combination of these things mean they have less money to invest in anything, least of which is something as volatile as bitcoin. While also having to liquidate their assets (eg. sell their bitcoins) to cover their increasing cost of living.
That's right, for bull season to really come, we need more good news. The fact that CPI decreased by 0.1% and the market is reacting positively is just a temporary exaggeration. But with news that inflation is showing signs of going down, we can expect inflation to drop below 2% soon and the Fed to lower interest rates soon. In particular, people are more optimistic and believe that the Fed will lower interest rates twice this year as inflation is gradually being controlled.
Although the overall situation of the economy is still in a bad phase, I think it is no worse than the 2022 crisis. And we can also see bitcoin has also recovered and surged from $15k to $66k despite the economic uncertainties. Therefore, if the Fed lowers interest rates twice this year, it is likely that we will also have bull season this year.