The crypto market, starved of fresh economic data due to the prolonged US government shutdown, will finally get a key data point with the release of September’s Consumer Price Index (CPI) on Friday.
The inflation figure can trigger larger price fluctuations in ether than in bitcoin a store of value asset. Overall, however, the expected market volatility is nothing out of the ordinary.
Inflation ticked higher in September
The consumer price index for September, to be published at 12:30 UTC, is expected to show the cost of living rose 3.1% from a year earlier, up from 2.9% in August and the highest in 18 months, according to a survey of economists by data provider FactSet. On a monthly basis, inflation likely rose 0.4%, matching August’s pace.
Core inflation, which excludes the volatile food and energy categories, is expected to have risen 3.1% for the third month in a row, with a monthly increase of 0.3%.
The consensus is that the data, whether or not it beats expectations, is unlikely to dissuade the Fed from cutting its benchmark interest rate by another quarter point next week.
That said, a warmer-than-expected print could bode well for the dollar, according to analysts at ING. A strengthening dollar index can stop gains in the crypto market.
“We don’t think US CPI will offer that opportunity as we expect a consensus 0.3% MoM core print. However, with 50bp of easing fully priced in by year-end, any hot print could offer good support to the dollar,” ING analysts said in a note on Thursday.
Meanwhile, a lower CPI could trigger a risk-on reaction in markets, according to digital asset trading firm Zerocap.
“The US government shutdown has starved eager market analysts of often crucial data, and a trickle of macro signals in the wake of the crypto pullback two weeks ago means a lower CPI reading could easily spark bullish sentiment amid an ongoing retail selloff,” John Toro, head of trading at Zerocap, said in an email.
Ether to swing 2.9%
According to data from the Deribit-listed options market, ether, the second-largest token by market capitalization, could move 2.9% after the CPI release, surpassing bitcoin’s volatility.
“The options market is currently pricing in a ±1.4% move for Bitcoin following today’s CPI release, while Ethereum is pricing in a larger move of ±2.9%,” Markus Thielen, founder of 10x Research, told CoinDesk.
Volmex Finance’s One-Day Implied Volatility Index for Bitcoin and Ether indicates similar expected price swings following the CPI release.
The one-day implied volatility indices for XRP and Solana are currently at 91% and 76% respectively, which equates to expected price movements of approximately 4.7% for XRP and 4% for Solana within 24 hours.
Bullish volatility?
It is important that these expected movements are not out of the ordinary. They reflect volatility in either direction and do not imply a bullish or bearish market outlook.
That said, Thielen’s analysis of key indicators such as Stochastics suggests a potential price jump in BTC.
“The daily stochastic is showing signs of bullish divergence, although it has yet to reach its typical 15% lower limit. This suggests that downside momentum may be waning, potentially paving the way for a short-term rally in bitcoin prices,” Thielen said.
