According to Kaiko, Bitcoin’s price volatility increases just before the monthly U.S. inflation data is released
The Fed’s monetary policy has an effect on both the crypto and conventional markets, and it is informed by monthly U.S. inflation figures.
According to estimates from Reuters reported by FXStreet, headline CPI inflation is expected to remain constant at 5%, but the core number, which includes the volatile food and energy component, is expected to have grown by 5.5% after March’s 5.6% gain.
Unknown CoinDeskSix hours before and after the monthly inflation estimates are revealed at 8:30 ET, the cryptocurrency’s price tends to be more volatile than usual.
The blue line in the accompanying graph is the average hourly volatility for the month, calculated as the absolute return on investment over the course of one hour. Indicating swings in the CPI over a six-hour time frame is the orange line.
Since April 2022, the orange line has been rising while the blue line has been falling slowly. The monthly inflation data has shown a tendency to introduce more volatility into the market, as seen by the orange circles constantly printing above the blue ones.
“Aubert predicted in an email that this tendency would continue since the U.S. Federal Reserve had made it plain the previous week that monetary policy will become even more data-dependent.
That is to say, there may be further price volatility (up or down) in Bitcoin later on today. According to statistics compiled by CoinDesk, the value of the cryptocurrency with the highest market cap is holding steady at roughly $27,620.
The Federal Reserve (Fed) increased rates last week by 25 basis points, bringing the new benchmark interest rate range to between 5% and 5.25%. Fed Chair Jerome Powell reiterated the data-dependent attitude during the press conference that followed the meeting, even though the policy statement left the door open for a halt in the rate rise cycle.
Therefore, an inflation number over expectations might bolster the argument for more rate rises, causing pain for risk assets such as cryptocurrency. If the data is lower than expected, though, bitcoin prices might swing wildly.
In an effort to rein in runaway inflation, the Federal Reserve began its tightening cycle 14 months ago and has since increased interest rates by 500 basis points.