The cryptocurrency market, deprived of new economic data due to the prolonged US government shutdown, will finally get a key piece of data with the release of the September Consumer Price Index (CPI) on Friday.
Inflation figure could cause greater price swings in ether what in bitcoin a store of value asset. However, in general, expected market volatility is nothing out of the ordinary.
Inflation rose in September
The consumer price index for September, due to be released 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 the pace of August.
Core inflation, which excludes the volatile food and energy categories, is forecast 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 it beats expectations or not, is unlikely to deter the Federal Reserve from cutting its benchmark interest rate by another quarter point next week.
That said, a higher-than-expected figure could bode well for the dollar, according to ING analysts. A strengthening dollar index may halt gains in the cryptocurrency market.
“We don’t think the US CPI will offer that opportunity as we expect a consensus underlying figure of 0.3% MoM. But surely with 50 basis points of easing fully priced in by the end of the year, any positive number 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 deprived market analysts of often crucial data, and a trickle of macro signals in the wake of the cryptocurrency pullback two weeks ago means a lower CPI reading could easily stoke bullish sentiment amid an ongoing retail sell-off,” John Toro, chief trading officer at Zerocap, said in an email.
Ether will fluctuate 2.9%
According to data from the options market listed on Deribit, ether, the second largest token by market value, could move 2.9% after the release of the CPI, outpacing 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 Research, told CoinDesk.
Volmex Finance’s one-day implied volatility indices for Bitcoin and Ether indicate similar expected price fluctuations after the CPI release.
The one-day implied volatility rates for XRP and Solana currently stand at 91% and 76%, respectively, translating into expected price movements of approximately 4.7% for XRP and 4% for Solana in 24 hours.
Bullish volatility?
It is important to note that these projected movements are nothing out of the ordinary. They reflect volatility in any direction and do not imply a bullish or bearish market outlook.
That said, Thielen’s analysis of key indicators, such as stochastics, suggests a possible BTC price rebound.
“The daily stochastic indicator is showing signs of bullish divergence, although it has not yet reached its typical 15% lower bound. This suggests that the bearish momentum may be fading, potentially paving the way for a near-term recovery in bitcoin prices,” Thielen said.
