The crypto market, starved of fresh economic data due to the prolonged U.S. government shutdown, will finally get a key data point with the release of September’s Consumer Price Index (CPI) on Friday.
The inflation figure could trigger larger price swings in ether ETH$3,968.74 than in bitcoin BTC$111,138.14, a store-of-value asset. Overall, however, the expected market volatility is nothing out of the ordinary.
Inflation ticked higher in September
The consumer price index for September, due for release 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 August's pace.
Core inflation, which excludes the volatile food and energy categories, is forecast to have increased by 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 deter the Fed from cutting its benchmark interest rate by another quarter-point next week.
That said, a hotter-than-expected print could bode well for the dollar, according to analysts at ING. A strengthening dollar index may arrest gains in the crypto market.
"We don’t think U.S. CPI will offer that opportunity as we expect a consensus 0.3% MoM core print. But surely with 50bp of easing fully priced in by year-end, any hot print could offer good support to the dollar," ING analysts said in a note Thursday.
Meanwhile, a lower CPI could trigger a risk-on reaction in markets, according to digital asset trading firm Zerocap.
"The U.S. government shutdown has starved keen market analysts of often crucial data, and a drip feed of macro signals in the wake 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 to swing 2.9%
According to data from the Deribit-listed options market, ether, the second-largest token by market value, could move by 2.9% following the CPI release, outpacing bitcoin's volatility.
"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 following the CPI release.
The one-day implied volatility indices for XRP and Solana currently stand at 91% and 76%, respectively, translating to expected price moves of approximately 4.7% for XRP and 4% for Solana within 24 hours.
Bullish volatility?
Importantly, these projected moves are nothing out of the ordinary. They reflect volatility in either direction and do not imply a bullish or bearish market outlook.
That said, Thielen's analysis of key indicators, such as the Stochastic, suggests a potential price bounce in BTC.
"The daily stochastic indicator is showing signs of bullish divergence, even though it has not yet reached its typical 15% lower bound. This suggests that downside momentum may be easing, potentially paving the way for a short-term recovery in bitcoin prices," Thielen said.
