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The U.S. Bureau of Labor Statistics is scheduled to release the consumer price index (CPI) for April on Wednesday at 8:30 AM ET (12:30 UTC).
According to FXStreet, Reuters estimates suggest that the headline CPI inflation figure is expected to remain steady at 5%, while the core figure (excluding volatile food and energy components) is projected to have risen by 5.5% after increasing by 5.6% in March.
Dessislava Aubert, a research analyst at the Paris-based cryptocurrency data provider Kaiko, has observed that Bitcoin (BTC) tends to experience higher intraday volatility in the six-hour period surrounding the release of inflation data.
The cryptocurrency tends to see heightened price turbulence in the six hour
window entered around the monthly inflation readings released at 8:30 ET. (Kaiko)
In the chart shown above, the blue line depicts the average hourly volatility for the month, calculated using the absolute hourly price return. Meanwhile, the orange line illustrates the volatility observed during the six-hour period surrounding the release of CPI data.
Over the past two years, the blue line in the chart has shown a steady decline, while the orange line has been trending upward, especially since April 2022. Additionally, the orange circles consistently appear above the blue circles, indicating that the release of monthly inflation data typically results in an increased level of volatility in 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.
To put it differently, there is a possibility that Bitcoin may experience an increase in price volatility (significant price fluctuations in both directions) later today. As of now, the top cryptocurrency by market capitalization is trading steadily at approximately $27,620, according to data from CoinCryptoUs.
Last week, the Federal Reserve (Fed) increased rates by 25 basis points, causing the benchmark borrowing costs to rise to the range of 5% to 5.25%. Although the policy statement suggested a possible pause in the rate hike cycle, Fed chair Jerome Powell maintained a data-dependent approach during the press conference that followed the meeting.
A higher-than-expected inflation reading could potentially bolster the argument for ongoing rate hikes, leading to negative consequences for risk assets, including cryptocurrencies. Conversely, if the data falls short of expectations, bitcoin may experience heightened levels of volatility. This underscores the importance of closely monitoring economic indicators and their potential impact on the market.
About 14 months ago, the Federal Reserve (Fed) initiated its tightening cycle to manage soaring inflation, which has resulted in a total rate hike of 500 basis points thus far. The resulting tightening of liquidity had a tumultuous impact on cryptocurrencies last year, underscoring the sensitivity of these assets to shifts in monetary policy.
Source Coindesk.
