Bitcoin (BTC) investors received what should have been welcome economic news Wednesday as the government reported a big slowdown in U.S. inflation.

And, indeed, bitcoin’s price quickly shot up to almost $31,000 following the report. It didn’t last long. As of press time, BTC had pulled back below $30,500, down more than 1% from where it was before the Consumer Price Index (CPI) data was released.

The report showed consumer prices increased 3% year-over-year in June, versus the 4% gain in May. Even better, the core rate – which excludes food and energy prices – slowed to a 4.8% increase after stubbornly holding above 5% earlier in 2023.

To the extent that speedy inflation has been among the headwinds sending bitcoin tumbling from its peak near $70,000 in November 2021, fading inflation risks would seemingly be supportive. That this didn’t happen today brings forth a few issues.

First, perhaps it’s another in what’s been a number of inflation head fakes in the Covid era. Remember 2021’s “transitory” phase in which the U.S. Federal Reserve was convinced it didn’t need to act on rising inflation due to its expectation that it was a temporary blip? Commenting on this morning’s CPI, The Wall Street Journal’s Nick Timiraos was reminded of inflation reports in July and August 2021, which seemed to confirm that hypothesis before subsequent data said otherwise. Timiraos doesn’t expect the Fed to be swayed from its path of additional rate hikes in 2023 by just this morning’s data.

Second, there was more news today than just the CPI print. On-chain data this morning showed two wallets labeled as belonging to the U.S. government and linked to seized bitcoin holdings from the Silk Road marketplace moved 9,825 bitcoin ($301 million) in three transactions. That sort of selling pressure may have more than balanced out any good inflation news.

Finally, markets anticipate. The price of bitcoin has risen more than 20% since mid-June. While the catalyst for that is commonly thought to be the BlackRock spot ETF application (and subsequent filings by a number of other asset managers, including Fidelity), perhaps some of the bullish action was due to markets sniffing out the improved June inflation report. As Timiraos further noted, observers had been talking about sizable softening in some of the CPI components for some time.

Maybe doubly frustrating the bitcoin bulls today is that traditional markets appear to have fully embraced the weaker inflation report. The dollar index is off more than 1%, which is exactly what one might expect if inflation concerns and subsequently the chances of future Fed rate hikes were receding. The 10-year Treasury yield is off a full 13 basis points (0.13%) to 3.84% and the two-year yield is down the same amount to 4.74%. And while bitcoin resides in the red on Wednesday, both the Nasdaq and S&P 500 are ahead by about 1% and hitting new all-time highs.