Upcoming US Inflation Data Will Impact Crypto Markets, But In Which Way?

The US Bureau of Labor Statistics will release CPI data for the month of June as early as tomorrow, July 13. The Consumer Price Index is a monthly data point that reveals the change in prices paid. In other words, it measures the development of the price level of a certain consumption basket containing some goods and services. It is chosen to represent the consumption habits of the average citizen. It is therefore considered an important indicator of inflation.

Crypto markets have reacted poorly to CPI data almost every time this year as rising inflation has fueled a series of interest rate hikes by the Federal Reserve.

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Why CPI data is important for cryptocurrencies

The CPI is an important indicator that indicates the current state of inflation in the country. The Federal Reserve is responding to rising inflation by raising interest rates and pursuing quantitative easing policies.

Recently, the Fed raised interest rates by 0.75 percentage points, the largest increase since 1994. The increased rates caused a big drop in the crypto markets. Bitcoin experienced its worst financial quarter in a decade. If further CPI data shows strong inflation, it could lead to a similar decline.

Michaël van de Poppe, CEO of Eight Global, revealed that Bitcoin is currently experiencing pressure on the downside and faces a crucial test of support at around $20.3k. BTC is currently trading around $20,000 with around a 4% drop in the last 24 hours.

If there is fear due to the upcoming CPI data, BTC prices may experience a big move down. For example, Bloomberg reported that most institutional investors surveyed expect BTC to likely fall to $10,000 before rebounding.

What do the markets expect?

Data from Marketwatch show that the general consensus is for an 8.8% CPI increase in June over last year. Inflation is currently at the highest level in more than 40 years in the United States.

In the previous days, there was a lot of excitement in the crypto markets about the price growth. Michael Burry predicted that the Fed will change its quantitative tightening policy and the data showed that sellers are worried about their short positions and expect a recovery in cryptocurrencies.

However, the upcoming release of CPI data has raised concerns among many cryptocurrency traders. Lark Davis believes CPI can kill the rising trend. Another major influencer, il Capo of Crypto, believes that with poor CPI, new lows are only a matter of time.

The Fed will release its interest rate decision on July 27. This will definitely be another date for the crypto community to watch out for.

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All content in this article is for informational purposes only and does not in any way serve as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.