Reserve

Wednesday

Bitcoin

April

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	In the world of cryptocurrencies, volatility is often the name of the game. Over the past few days, the Consumer Price Index (CPI), a key volatility catalyst for risk assets, took center stage in its potential to influence Bitcoin&#8217;s (BTC) price.
<figure id="attachment_21533" aria-describedby="caption-attachment-21533" style="width: 1053px" class="wp-caption alignnone"><img decoding="async" class="wp-image-21533 size-full" src="https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1.webp" alt="BTCUSD 1 hour candle chart Bitstamp 1" width="1053" height="677" srcset="https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1.webp 1053w, https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1-300x193.webp 300w, https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1-1024x658.webp 1024w, https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1-768x494.webp 768w, https://crypto.ro/en/wp-content/uploads/2023/05/BTCUSD-1-hour-candle-chart-Bitstamp-1-750x482.webp 750w" sizes="(max-width: 1053px) 100vw, 1053px" title="Bitcoin prices react to latest CPI data 1"><figcaption id="caption-attachment-21533" class="wp-caption-text">BTC/USD 1-hour candle chart (Bitstamp) | TradingView</figcaption></figure>
Prior to the CPI data release, financial commentator Tedtalksmacro predicted a forthcoming drop in inflation. In a <a href="https://www.youtube.com/watch?v=SDgI4ldB_E8" rel="nofollow noopener" target="_blank">YouTube analysis</a> on May 9, he stated, &#8220;We&#8217;re likely to see a gradual decline, and actually a pretty steep decline, in inflation.&#8221;
His analysis was supported by Cleveland Fed Inflation Forecast and &#8216;Trueflation,&#8217; an unofficial leading indicator for inflation trends.
Tedtalksmacro then outlined potential Bitcoin price changes relative to various possible CPI figures, as per probabilities indicated by JPMorgan Chase.
A CPI above 5.5% held a 4% probability of pushing BTC price to $25,000. On the other hand, a CPI of 4.5% or lower, although deemed a less likely scenario with only a 1% probability, could elevate BTC prices above $30,000.
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
CPI gameplan for <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw" rel="nofollow noopener" target="_blank">#Bitcoin</a>
Above 5.5% &#8211;&gt; $25,000 (4% probability)
5.3% to 5.5%&#8211;&gt; $26,500 (25% probability)
5.0% to 5.2% &#8211;&gt; $28,500 (50% probability)
4.7% to 4.9% &#8211;&gt; $29,000 (20% probability)
4.5% or lower &#8211;&gt; $30,000+ (1% probability)
*Probabilities according to JPMorgan
&mdash; tedtalksmacro (@tedtalksmacro) <a href="https://twitter.com/tedtalksmacro/status/1656189513910067202?ref_src=twsrc%5Etfw" rel="nofollow noopener" target="_blank">May 10, 2023</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
At the time, the CME Group’s FedWatch Tool reported an 80% market expectation for the Federal Reserve to pause interest rate hikes in June.
<h2 id="actual-cpi-data-release-and-its-effect-on-btc-price">Actual CPI data release and its effect on BTC price</h2>
However, the actual <a href="https://crypto.ro/en/news/bitcoin-hits-10-month-high-as-u-s-inflation-data-beats-expectations/">CPI data released</a> by the Bureau of Labor Statistics (BLS) on Wednesday morning told a slightly different story. The annual U.S. inflation rate slowed to 4.9% in April from 5.0% in March, which was in line with economists&#8217; forecasts.
Following the news, <a href="https://crypto.ro/en/bitcoin/">Bitcoin</a>&#8216;s price saw a modest increase of over 1% to just above $28,000.
<figure id="attachment_21534" aria-describedby="caption-attachment-21534" style="width: 1858px" class="wp-caption alignnone"><img decoding="async" class="wp-image-21534 size-full" src="https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart.png" alt="btcusd 1 day chart" width="1858" height="792" srcset="https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart.png 1200w, https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart-300x128.png 300w, https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart-1024x436.png 1024w, https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart-768x327.png 768w, https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart-750x320.png 750w, https://crypto.ro/en/wp-content/uploads/2023/05/btcusd-1-day-chart-1140x486.png 1140w" sizes="(max-width: 1858px) 100vw, 1858px" title="Bitcoin prices react to latest CPI data 2"><figcaption id="caption-attachment-21534" class="wp-caption-text">BTC/USD one day chart | CoinMarketCap</figcaption></figure>
The core CPI, which excludes food and energy costs, rose by 0.40% in April, matching forecasts and reflecting the same advance as in March. The annual core CPI rate in April was 5.5%, again in line with forecasts and slightly lower than March&#8217;s 5.6%.
This report came as a relief to many traders, who are keeping a close eye on inflation, as it&#8217;s viewed as a key factor that drives volatility in risk assets.
The U.S. Federal Reserve&#8217;s Federal Open Market Committee (FOMC) had hinted at a pause in its historic run of rate increases during its last meeting in early May. This swift pace of rate hikes, which took the benchmark fed funds rate from about 0% in early 2022 to the current targeted range of 5.0%-5.25%, has yet to bring inflation down to the Fed&#8217;s 2% target.
This morning&#8217;s slight moderation in inflation may provide the Fed with room for an easier monetary policy, a move traders are currently betting on. Following the CPI data release, the U.S. 10-year Treasury yield has decreased seven basis points to 3.45%, and the 2-year nine basis points to 3.94%.

Bitcoin prices react to latest CPI data

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