The Effect of US Inflation on the Cryptocurrency Market

Cryptocurrency investors are eagerly awaiting the announcement of the Consumer Price Index (CPI) data for September. The September CPI data is expected to show an annual increase of 3.1%, reaching its highest level in the last 18 months. This situation could increase price volatility of crypto assets. Analysts particularly highlight that there may be sharper fluctuations in the price of Ethereum compared to Bitcoin.

It is stated that the Consumer Price Index data is the most important economic data to be announced following a prolonged government shutdown. According to FactSet data, the increase in inflation in September is expected to surpass the rate of 2.9% in August. The monthly increase is projected to remain steady at 0.4%. Additionally, core inflation is thought to remain at 3.1% for the third consecutive month.

According to analysts' assessments, the released data will not affect the Federal Reserve’s (Fed) plans to cut the policy interest rate by 25 basis points in the meeting it will hold next week. However, if the data comes in above expectations, the dollar index may strengthen, which could lead to selling pressure in the crypto market in the short term. ING analysts commented, “Considering the 50 basis points of easing priced in until the end of the year, a high CPI figure could support the dollar.”

On the other hand, lower CPI data could increase risk appetite in the markets, potentially triggering a short-term rise in crypto assets. John Toro, head of trading at Zerocap, stated that a low inflation figure could revive investor appetite after a long pause in data flow.

In terms of volatility, Ethereum’s current volatility of 2.9% is twice that of Bitcoin’s 1.4%. This indicates that Ethereum’s price may fluctuate more compared to Bitcoin. Additionally, the one-day volatility rate of XRP is at 91%, while Solana’s is at 76%. These rates create expectations of approximately 4.7% price movement for XRP and around 4% for Solana.

Markus Thielen, founder of 10x Research, stated that stochastic indicators have given short-term recovery signals for the price of Bitcoin. Thielen said, “Downward momentum seems to be weakening, which could pave the way for a short-term rise in Bitcoin.”