Despite widespread anticipation for the U.S. inflation report set to be released this Friday, bitcoin traders appear largely indifferent, as evidenced by recent market activity. This report is expected to shed light on the economic consequences of the ongoing conflict in Iran and its impact on inflation.
Markus Thielen, founder of 10x Research, shared with CoinDesk via email that “the bitcoin market currently anticipates only a 2.5% fluctuation following the release of the inflation data.” This forecast is based on options and derivatives pricing, reflecting traders’ expectations for Bitcoin’s potential price movement within a specific timeframe.
A swing of 2.5% falls well within Bitcoin’s recent average volatility, suggesting no significant shifts are expected from the upcoming inflation figures. The market’s tranquility is further demonstrated by the BVIV index—a measure of 30-day implied volatility—which has dropped to 46.5%, its lowest since January 31st, according to TradingView data.
This implies an anticipated daily movement of about 2.9%, notably below the 30-day average of 3.4%. Implied volatility is derived from options demand and indicates traders’ expectations for price fluctuations over a specified period.
The CPI release on Friday is largely seen as inconsequential by traders, despite its potential to reveal inflationary pressures stemming from the Iran conflict that began in late February. “Even if March’s U.S. figures don’t fully capture the current situation, they do provide an initial glimpse of how the Middle East conflict might influence U.S. prices,” noted Commerzbank.
Interest rate markets have moderated expectations for Federal Reserve rate cuts this year due to increased inflation risks from the Iran conflict and subsequent energy price hikes. The CPI data, expected at 8:30 ET on Friday, is projected by MarketWatch to show a rise in living costs of 3.4% year-over-year in March, up sharply from February’s 2.4%. The core figure, excluding volatile food and energy components, is anticipated to have risen by 2.7%, following March’s 2.5% increase.
Fuel and energy price spikes, largely due to the Iran conflict, are expected to drive these increases. U.S. gasoline prices reached over $4 per gallon in March for the first time since August 2022.
Iliya Kalchev from Nexo, a digital asset wealth manager with $8 billion under management, noted: “With ongoing energy shocks affecting prices, each inflation report significantly impacts crypto markets—softer readings might revive rate-cut discussions, while hotter ones could solidify expectations of prolonged high rates.”
Timothy Misir, head of research at BRN, emphasized that Bitcoin’s next movements hinge on Friday’s inflation data and the upcoming Fed meeting from April 28-29. “These events will clarify whether policymakers still view inflation as manageable post-oil shock or if the conflict extends the no-cuts policy,” he stated in an email.
In essence, there is a notable discrepancy between expert expectations and how traders are pricing Friday’s inflation data. Whether markets are justified in their indifference or the data proves crucial remains to be seen when results are published.