US CPI Data and Its Impact on Crypto Market

UTC by Bhushan Akolkar · 2 min read
US CPI Data and Its Impact on Crypto Market
Photo: Depositphotos

Bitcoin and the broader crypto market bounced back immediately in hours following the release of the US CPI inflation data on Thursday.

On Thursday, October 13, the United States released its inflation data for the month of September 2022. The US CPI came higher than expected at 8.2% for the last month. This goes on to show that the issue of red-hot inflation in the US economy continues to persist.

This is probably the sixth consecutive month that the US CPI has continued to stay above 8%. As a result, the Fed is likely to continue with its interest rate hikes going ahead. As per market analysts, the Fed is likely to raise interest rates to 4.25%-4.5% before reversing its trajectory again.

However, this rate could severely impact corporate earnings and the overall US economy. The bigger question is whether the Fed could manage a ‘soft landing’. Several market analysts have suggested that the US economy could slip into a recession with a ‘hard landing’. JPMorgan chief Jamie Dimon recently said that a recession could be due in the next 6-9 months.

How Crypto Reacted to US CPI

Soon as the CPI numbers for September were released on Thursday morning, the crypto market reacted negatively. The broader crypto market lost more than $20 billion in a flash.

The Bitcoin (BTC) price also collapsed 4% instantly With Bitcoin moving all the way to $18,400. The correction in the altcoin space was greater with each altcoin falling anywhere between 4-7%.

However, a few hours later, there was a major short covering with Bitcoin and all other digital assets recovering fast. The recovery in the crypto space followed after a string rally on Wall Street. Despite the high CPI inflation numbers, Dow Jones and other indices ended the day more than 2% higher.

On-chain data provider Santiment commented on the short covering noting “Traders shorted #Bitcoin & #altcoins heavily as inflation news broke. When $BTC hit a 3-week high short vs. long exchange ratio at 2 pm UTC, prices reversed course & began rising, & many betting against #crypto got liquidated. Prices move toward the crowd’s least expectation”.

In short, the short traders got hammered badly hours after the release of the CPI data. As of press time, Bitcoin is trading 3.7% up at a price of $19,700 with a market cap of $379 billion.

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Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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