The crypto market, deprived of new economic data due to the prolonged US government shutdown, will finally get a key data point with Friday’s release of the September Consumer Price Index (CPI).
Inflation Figure Could Trigger Bigger Ether Price Swings than in bitcoin a store of value asset. However, overall, the expected volatility in the markets is nothing extraordinary.
Inflation rose in September
The consumer price index for September, scheduled for release at 12:30 UTC, is expected to show the cost of living rose 3.1 percent from a year earlier, up from 2.9 percent in August and the highest level in 18 months, according to a survey of economists by data provider FactSet. On a monthly basis, inflation likely increased by 0.4%, matching the pace in August.
Core inflation, which excludes the volatile food and energy categories, is expected to have risen 3.1% for the third consecutive month, with a monthly gain of 0.3%.
The consensus is that this data, whether higher or lower than expected, is unlikely to deter the Fed from cutting its benchmark interest rate by another quarter point next week.
That said, a warmer-than-expected result could bode well for the dollar, according to ING analysts. A strengthening dollar index could halt gains in the crypto market.
“We don’t think US CPI will provide this opportunity, as we forecast a consensus 0.3% m/m. But with 50 basis points of easing fully priced in by the end of the year, any warm numbers could provide good support for the dollar,” ING analysts said in a note on Thursday.
Meanwhile, a decline in CPI could trigger a risk appetite response in markets, according to digital asset trading firm Zerocap.
“The U.S. government shutdown has deprived market analysts of often crucial data, and a drip feed of macroeconomic signals following crypto’s pullback two weeks ago means a decline in CPI could easily fuel bullish sentiment amid an ongoing retail selloff,” John Toro, head of trading at Zerocap, said in an email.
Ether hovers at 2.9%
According to data from the options market listed on Deribit, ether, the second largest token in terms of market value, could move 2.9% after the CPI release, surpassing the volatility of bitcoin.
“The options market is currently pricing in a move of ±1.4% for Bitcoin following today’s CPI release, while Ethereum is pricing in a bigger move of ±2.9%,” Markus Thielen, founder of 10x Research, told CoinDesk.
Volmex Finance’s one-day implied volatility indices for Bitcoin and Ether indicate similar expected price movements following the CPI release.
The one-day implied volatility indices for XRP and Solana currently stand at 91% and 76%, respectively, which translates to expected price movements of approximately 4.7% for XRP and 4% for Solana within 24 hours.
Bullish volatility?
It’s important to note that these projected moves are nothing out of the ordinary. They reflect volatility in both directions and do not imply a bullish or bearish market outlook.
That said, Thielen’s analysis of key indicators, such as stochastic, suggests a potential rebound in BTC prices.
“The daily stochastic indicator is showing signs of bullish divergence, although it has not yet reached its usual lower limit of 15%. This suggests that the bearish momentum may be easing, potentially paving the way for a near-term recovery in bitcoin prices,” Thielen said.
