On Wednesday at 8:30 AM ET (12:30 UTC), the U.S. Bureau of Labor Statistics is set to release the consumer price index (CPI) for April. The headline CPI inflation figure is expected to remain unchanged at 5%, while the core figure, excluding volatile food and energy components, is predicted to have increased by 5.5% following March’s 5.6% rise, according to Reuters estimates published by FXStreet. Interestingly, Bitcoin (BTC) has typically exhibited increased intraday volatility in the six-hour window before and after the inflation data release, as pointed out by Dessislava Laneva, a research analyst at Paris-based crypto data provider Kaiko.
This tendency for heightened price turbulence around the monthly inflation readings has been particularly pronounced since April 2022. The phenomenon seems to be closely tied to the United States Federal Reserve’s (Fed) approach to monetary policy. “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,” Laneva stated in an email.
Hence, Bitcoin could experience further price fluctuations (in any direction) later today. As of now, the leading cryptocurrency by market value is trading flat at around $27,620. Last week, the Fed raised rates by 25 basis points, bringing the benchmark borrowing costs to 5%-5.25%. While the policy statement left the door open for a pause in the rate hike cycle, Fed chair Jerome Powell maintained a data-dependent stance during the post-meeting press conference.
An above-forecast inflation reading might strengthen the argument for additional rate hikes, which could negatively impact risk assets, including cryptocurrencies. Conversely, if the data falls short of expectations, Bitcoin may experience heightened volatility on the upside.
The Fed began its tightening cycle 14 months ago in an effort to control rampant inflation, raising rates by 500 basis points since then. This liquidity tightening notably affected cryptocurrencies last year. As the market awaits the upcoming CPI data, it will be interesting to observe Bitcoin’s potential price shifts and the implications for the broader cryptocurrency market.
Edited by Parikshit Mishra.
Source: Coindesk
