Cryptocurrency traders have had a difficult time understanding the market in the last 24 hours as Bitcoin The price swung wildly between $86,000 and $90,000.
Things could get more exciting later on Thursday with the release of key US inflation data for November. This will give a fresh look at price pressures in the economy after the record government shutdown wiped out October data and left the Federal Reserve in the dark.
What the data could show
Data is expected to show that the headline consumer price index (CPI) rose to 3.1% annually in November, up from 3% in October, according to FactSet consensus estimates. Core inflation, which excludes volatile food and energy prices, is forecast at 3.1%.
That’s still one point above the Fed’s 2% target, which could encourage Fed hawks to scale back expectations for interest rate cuts. As of this writing, markets anticipate at least two 25 basis point Fed rate cuts next year.
Expert view
“This release is highly anticipated, in large part because recent data disruptions related to the government shutdown left the Federal Reserve (and the broader market) partially blinded. With the October report cancelled, this is the first comprehensive look at price developments in weeks,” Dr. Mohamed A. El-Erian, president of Queens’ College, University of Cambridge and part-time chief economic advisor to Allianz and president of Gramercy Fund Management, said in X.
He added that the markets will look for two things: whether the disinflationary trend in services has stronger foundations and what remains of the tariff-driven price transfer in good inflation.
Why Bitcoin could react
If data confirms disinflation, markets could factor in additional rate cuts by 2026, boosting risk-taking in financial markets. However, note that BTC did not show a sustained bullish reaction to the employment data released on Tuesday, which showed the unemployment rate at its highest level since September 2021.
Additionally, the 10-year Treasury yield has remained above 4% in recent months despite Fed easing. This is partly due to uncertainty over inflation, as the CPI has risen steadily from 2.3% in May to 3% in October.
Longer duration yields, like the 10-year bond, incorporate investors’ bets on inflation trends, economic growth and the Federal Reserve’s policy paths. Higher yields indicate stronger expectations in these areas and increase the attractiveness of fixed income instruments, which reduces the attractiveness of risk assets.
Against this backdrop, a higher-than-expected inflation report could push yields higher further, complicating matters for BTC bulls.
Crypto challenges
Note that crypto-specific factors don’t help either. For example, MSCI’s review of digital asset Treasuries poses a major hurdle.
“MSCI is reviewing the index eligibility of digital asset treasury companies, with possible exclusions for companies that have more than 50% exposure to cryptocurrencies. If enacted, passive outflows could reach up to $2.8 billion, adding pressure to an already fragile market,” said Singapore-based QCP Capital’s market analysis team.
