Explore what investors are expecting from Bitcoin ahead of the release of September U.S. inflation data, or CPI. Will BTC rise or crash?
Investors expect volatility to increase as the U.S. Consumer Price Index (CPI) will release its September data at 8:30 a.m. ET. The September U.S. inflation data will set the stage for the Federal Reserve’s upcoming interest rate decision and affect risk assets such as Bitcoin, Ethereum, and stock markets.
Bitcoin (BTC) has plunged 5% over the past ten days, shocking cryptocurrency investors who had expected a bullish breakout in October. This price action proves that history doesn’t always repeat or rhyme. However, Bitcoin’s directionality could change with this macroeconomic event.
Let’s understand what is US CPI or inflation and how this macroeconomic data point affects risky assets.
What does Bitcoin expect from US CPI today?
Bitcoin could see some short-term volatility following the release of the US CPI or inflation data. The odds are strong for an upside move, but the ultimate directional bias will remain bearish until BTC breaks above the $65,000 resistance level.
What is inflation data?
The U.S. CPI or inflation data measures the average change in the price of a basket of goods and services consumed by the average American. The CPI data is released monthly by the U.S. Bureau of Labor Statistics (BLS) and is a key indicator of inflation.
How US CPI Affects Bitcoin
While actual inflation data is important, what investors need to pay attention to is the degree to which the number deviates from expectations. Generally speaking, higher-than-expected inflation data will trigger inflation concerns and may prompt investors to favor safe-haven assets such as gold, precious metals, and government bonds. Therefore, higher inflation data is not good for risky assets such as stocks and cryptocurrencies. The second impact is that rising inflation may prompt central banks to raise interest rates to curb borrowing, thereby reducing liquidity in risky assets.
On the other hand, lower inflation data boosts borrowing and increases liquidity in risky markets, sparking a rally.
The inflation figure for August was 2.5% and the consensus or expectation was 2.3%. Here are some possible outcomes depending on the inflation figure.
Inflation exceeds expectations: Investors can expect Bitcoin prices to plummet. Inflation is in line with expectations: Bitcoin will likely continue to consolidate. Inflation is lower than expected: This outlook will help boost risk assets like Bitcoin and could kick-start an October rally.
Bitcoin Price Analysis: BTC takes a breather after a 6.40% plunge
As explained in a previous article, Bitcoin plunged 6.40% to $603,000 after testing $639,000 to $650,000. Looking ahead, investors can expect a short-term rally to push BTC up to $615,000 before continuing the downtrend.
Due to the recent plunge, the RSI has fallen below the 50-MA but has not yet reached oversold levels. A bounce to 61.5K could lead to a retest of the MA, which would reveal where BTC is headed next. A rejection here could further strengthen the previous Bitcoin price prediction that hinted at a drop below $60.3K, followed by a retest of $57.2K to $57.9K.
If BTC price flips the $618,000 resistance level into support, it would indicate a resurgence of the bull run. This prospect would push prices further up to re-cross the $64,000 barrier. A breakout above the $65,000 resistance level would confirm a bull run restart and could propel Bitcoin back above the psychological $70,000 mark.
