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 the September Consumer Price Index (CPI) on Friday.
The inflation figure can trigger larger price swings in ether than bitcoin an asset-of-value asset. Overall, however, expected market volatility is out of the ordinary.
Inflation ticked higher in September
The consumer price index for September, due out 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 is likely to rise by 0.4%, matching August’s pace.
Core inflation, which excludes volatile food and energy categories, is expected to rise 3.1% for the third straight month, with a monthly gain of 0.3%.
The consensus is that the data, whether it beats or misses expectations, is unlikely to prevent the Fed from cutting the 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 could arrest 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. But certainly with 50bp of absolute price easing by the end of the year, any warm print could offer good support to the dollar,” analysts said in a note Thursday.
Meanwhile, a lower CPI could trigger a reaction-on reaction in the markets, according to digital asset trading firm ZeroCap.
“The US government shutdown has starved keen market analysts of often important data, and a drip feed of macro signals at the end of the crypto pullback two weeks ago means a lower CPI reading could easily stoke bullish sentiment amid an ongoing retail selloff,” John Toro, head of trading at Zerocap, said in an email.
Ether on swing 2.9%
According to data from the options market listed on Deribit, ether, the second largest token by market value, could move 2.9% following the release of the CPI, which exceeded the volatility of Bitcoin.
“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 ±2.9% move,” Markus Thielen, founder of 10x Researchtold Coindesk.
Volmex Finance’s one-day implied volatility indices for bitcoin and ether indicate similar expected price volatility 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 over a 24-hour period.
Bullish volatility?
Importantly, these expected moves are out of the ordinary. They reflect volatility in either direction and do not indicate a bullish or bearish market outlook.
That said, Thielen’s analysis of key indicators, such as stochastic, suggests a potential price bounce in BTC.
“The daily stochastic indicator is showing signs of a bullish divergence, although it has not yet reached the usual 15% lower bound. This indicates that the downward momentum may be easing, potentially paving the way for a short-term recovery in bitcoin prices,” said Thielen.
