Kaiko Study Reveals: Brace Yourself for Bitcoin’s Wild Ride During U.S. Inflation Reports!

"U.S. Bureau of Labor Statistics to Release CPI Figures for April, Forecast Predicts Unchanged Inflation Rate of 5% Despite Increase in Core Figure"

At 8:30 AM ET (12:30 UTC) on Wednesday, the U.S. Bureau of Labor Statistics will release the Consumer Price Index (CPI) for April. The headline CPI inflation figure is expected to remain steady at 5%, while the core figure, which does not include the volatile food and energy component, is expected to have risen by 5.5% after March’s 5.6% increase, according to Reuters estimates published by FXStreet.

Bitcoin (BTC) has a history of experiencing increased intraday volatility in the six-hour window before and after inflation data, according to Dessislava Aubert, a research analyst at Paris-based crypto data provider Kaiko. The cryptocurrency tends to experience heightened price turbulence in the six-hour window surrounding the monthly inflation readings released at 8:30 ET. In the above chart, the blue line indicates the average hourly volatility for the month as measured by the absolute hourly price return. The orange line represents volatility within the six-hour CPI window. The blue line has steadily declined over the past two years, with the orange line trending north, particularly since April 2022. The orange circles have consistently printed above the blue circles, indicating that the monthly inflation data tends to inject extra volatility into the market.

“The intraday volatility, especially around data releases, remains above average. This trend will continue as the U.S. Federal Reserve made it clear last week that monetary policy will be even more data-dependent,” Aubert said in an email. Therefore, bitcoin could see heightened price turbulence later today. The leading cryptocurrency by market value is currently trading flat at around $27,620, according to CoinDesk data.

The Federal Reserve (Fed) raised rates by 25 basis points last week, lifting the benchmark borrowing costs to the 5%-5.25% range. While the policy statement opened the doors for a pause in the rate hike cycle, Fed chair Jerome Powell maintained the data-dependent stance during the post-meeting press conference. An above-forecast inflation reading might strengthen the case for continued rate hikes, bringing pain to risk assets, including cryptocurrencies. On the flip side, bitcoin may see volatility on the higher side if the data misses expectations. The Fed began its tightening cycle 14 months ago to control rampant inflation and has raised rates by 500 basis points since then. The liquidity tightening roiled cryptocurrencies last year.

It is clear that the market is eagerly awaiting the CPI data release, with bitcoin traders in particular poised to react to any significant movements. As always, there are risks associated with trading cryptocurrencies, and investors should exercise caution when making investment decisions.

Martin Reid

Martin Reid

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