The price of Bitcoin (BTC) has been in freefall for most of 2022, with contagion rocking the cryptocurrency markets alongside broader macro concerns—paired with a tenuous geopolitical climate.

While BTC is still down nearly 60% year to date, the world's leading cryptocurrency has seen a sharp price increase today, rising more than 7% over the past 24 hours. However, after a steep drop on Thursday, Bitcoin is still down more than 3% month over month.

This morning's price increase came hot on the heels of a worse-than-expected consumer price index (CPI) report from the Bureau of Labor Statistics, which caused both cryptocurrencies and traditional markets to tumble in Thursday morning trading.

However, as a new day dawned on Friday, investors seemed ready to forget some of their fears and start looking at the struggling prices as buying opportunities.

Ethereum (ETH), the world's second-largest cryptocurrency, saw a strong bounce of more than 9%, crossing the $1,300 threshold again.

Why is Bitcoin Going Up Today?

While green prices have presented welcome refuge for investors, even after the bounce, Bitcoin is still down for the year, trading for less than a third of its all-time high of nearly $68,800 in November 2021.

Yesterday, the U.S. Bureau of Labor Statistics released its September CPI report. This report revealed that CPI rose 0.4% in September. This added up to a yearly gain of 8.2%, which was higher than the expected 8.1%. In addition, "core" CPI, which doesn't include energy or food, rose 6.6% annually to its highest level since 1982.

On the news, markets immediately went into sell-off mode due to fears this might precipitate another interest rate hike when the Federal Open Market Committee (FOMC) meets next month. However, this sell-off quickly turned around.

After a wild trading day, all three major indices were back up this morning, albeit slightly. The tech-heavy Nasdaq was up 0.6%. The S&P and Dow were up 0.2% and 0.5%, respectively.

Most investors still believe the FOMC will raise rates next month. According to the CME Group's FedWatch tool, market observers foresee a 99% chance of a 75 bps rate hike.

This leads many experts to believe that today's bounce in Bitcoin has more to do with BTC dropping to around the $18,400 threshold yesterday and investors seeing that as a buying opportunity. In addition, the Nasdaq's simultaneous rise shows a continued coupling of risk assets like cryptocurrencies and tech stocks.

This means that there could still be many more ups and downs for Bitcoin and crypto in the interim.

Bitcoin Volatility

Volatility and Bitcoin come hand in hand. According to Kraken Intelligence's September 2022 Market Recap and Outlook Report, Bitcoin's volatility rose from 52% in August to 64% in September, with a spike of 74% on Sept. 17.

Kraken

On the other hand, according to the Kraken report, Ethereum's volatility started the month significantly higher at 89%. Still, it then dropped to 78% by the end of the month, with its own spike of 94% on Sept. 17 as well, just a few days after the "merge."

The Ethereum merge is the platform's shift from a proof of work network to a proof of stake network.

However, even with this lower volatility, Bitcoin is still notorious for sudden jumps. Given that the financial climate remains extremely unpredictable, leaving investors on edge, there is no guarantee that what we are experiencing will stay, even if the worst of the past year won't return.

What Does Bitcoin's Bounce Mean for Investors?

The big question facing investors is whether this is a sign that the Bitcoin bottom is in or if the refuge is merely a dead cat bounce—where prices temporarily rebound amid a longer-term negative trend, only to resume the downward fall after that.

While the bounce has provided a welcome reprieve, the reality is that we are in an unprecedented territory regarding the geopolitical climate, rampant inflation, and the Fed's stance on interest rates.

Anyone familiar with the industry knows that even at the best of times, predicting the short-term price action of digital assets is near impossible. That holds particularly true in this market environment.