BTC volatility spikes around monthly US CPI release: Kaiko

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At 8:30 a.m. ET (12:30 UTC) on Wednesday, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) for April.

The headline CPI inflation figure is expected to remain unchanged at 5% and the core figure, which excludes the volatile food and energy component, is expected to have risen 5.5% after the rise in 5.6% from March, according to Reuters estimates published by FXStreet.

Bitcoin (BTC) has historically seen increased intraday volatility in the six-hour window before and after inflation data, according to Dessislava Aubert, research analyst at Paris-based crypto data provider Kaiko.

In the chart above, the blue line indicates the average hourly volatility for the month, as measured by the absolute hourly price return. The orange line represents volatility in the six-hour CPI window.

The blue line has steadily declined over the past two years, with the orange line trending northward, particularly since April 2022. The orange circles have consistently printed above the blue circles, a sign that monthly inflation data tend to inject additional volatility into the market.

“Intraday volatility, especially around data releases, remains above average. This trend will continue as the US Federal Reserve made it clear last week that monetary policy will become even more dependent on data,” Aubert said in a statement. E-mail.

In other words, bitcoin could experience increased price turbulence (two-way price swings) later today. The leading cryptocurrency by market value is currently trading at around $27,620, according to data from CoinDesk.

The Federal Reserve (Fed) raised rates by 25 basis points last week, bringing benchmark borrowing costs to the 5% to 5.25% range. As the policy statement opened the door to a pause in the rate hike cycle, Fed Chairman Jerome Powell maintained the data-dependent stance during the press conference following the meeting.

Therefore, a higher-than-expected inflation reading could strengthen the case for continued rate hikes, which would hurt risky assets, including cryptocurrencies. On the other hand, bitcoin may see volatility rise if the data falls short of expectations.

The Fed launched its tightening cycle 14 months ago to control runaway inflation and has raised rates by 500 basis points since then. Tighter liquidity rattled cryptocurrencies last year.

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