How will Friday's CPI release affect Bitcoin?

The upcoming U.S. September CPI release on October 24th is highly significant as it's the first major economic data since the government shutdown and the sole inflation indicator available to the Fed. Analysts highlight its direct impact on Bitcoin:

A lower-than-expected CPI (slowing inflation) could reinforce expectations for Fed rate cuts, weaken the U.S. dollar, and potentially restart ETF inflows, pushing Bitcoin toward the $117,000-$120,000 range.
A higher-than-expected CPI (rising inflation) may temporarily revive rate hike speculation, strengthen the dollar and Treasury yields, and test Bitcoin's support level around $100,000 as funds flow to safe-haven assets.
The market often exhibits a "buy the rumor, sell the news" pattern, with elevated volatility expected. Post-release trends in the dollar and Treasury yields will be key indicators for Bitcoin's short-term direction.

Bitcoin is gearing up for the release of the U.S. Consumer Price Index (CPI) for September on October 24th – the first major macroeconomic data release since the U.S. federal government shutdown.

Analysts at “The Kobeissi Letter” highlighted the significance of the data update, noting that it was the first time CPI data was released on a Friday since January 2018 and that it came just five days before the Federal Reserve’s meeting on October 29.

In addition, since the U.S. Department of Labor has suspended the release of all other important economic data until the government shutdown ends, this CPI report will become the Federal Reserve's only key inflation measure.

This "single-indicator reliance" pushes up the importance of the data, as there will be no new employment, non-farm payrolls or producer price data to balance the overall economic picture.

The latest CPI report showed that the US inflation rate was 2.9% in August, a slight increase from 2.7% in the previous month.

Based on this, Wells Fargo economists currently expect the inflation rate to rise slightly to 3.1% in September, still within the range consistent with "gradual disinflation."

The core CPI, which excludes food and energy prices, is expected to remain stable, suggesting that inflationary pressures are easing but have not yet completely disappeared.

Across financial markets, traders have begun positioning for potential policy easing. Futures data indicates a 99% probability of a Fed rate cut at its October 29 meeting, and an 85% probability of another rate cut in December, according to the CME FedWatch tool.

It is worth noting that if the CPI data is lower than expected (i.e. inflation slows), it may further strengthen this easing expectation and weaken the US dollar trend.

If the data is higher than expected (i.e. inflation exceeds expectations), speculation of an interest rate hike may be temporarily restarted.

Analysts at Kautious Data said the CPI’s impact on Bitcoin remains direct because currently “macro signals are scarce, which may provide a short-term bullish basis for the cryptocurrency narrative while also adding tail risks to the broader market.”

The agency pointed out that if the core CPI increases by less than 0.3% month-on-month (i.e. inflation slows down), it will support dovish policy expectations, put pressure on the US dollar, and benefit assets such as gold, stocks and Bitcoin.

However, if inflation data shows "stickiness" (i.e., inflation remains high), especially if service and housing prices rise by more than 0.4% month-on-month, it could boost the dollar and put pressure on risky assets (including Bitcoin).

The agency also pointed out that the cryptocurrency market usually reacts by "rising before the data is released and selling after the data is released." This phenomenon is often accompanied by a surge in volatility and a reversal of capital flows.

Meanwhile, Dean Chen, an analyst at digital asset firm Bitunix, said the market reaction will depend on how investors reassess risks after the data is released.

He pointed out that if the data meets expectations, the market may maintain the current narrative of "high interest rates but long-term stability", and Bitcoin may continue to consolidate near its recent highs.

However, if the core CPI data is stronger than expected, it may push up U.S. Treasury yields and the US dollar, triggering a short-term correction in Bitcoin from its recent high range.

In addition, Dean Chen added that if the CPI data is lower than expected (inflation cools down), it may restart the inflow of ETF funds and push Bitcoin towards the range of 117,000-120,000 US dollars.

If the data is higher than expected (inflation rises), it may prompt funds to flow back to safe-haven assets, testing Bitcoin's support level around $100,000.

He further stated: “Traders should pay attention to the real-time trend of U.S. Treasury yields and the U.S. dollar after the data is released: if both rise at the same time, it will put pressure on Bitcoin; if both fall back, it may reignite risk appetite.”

“In this environment, volatility will remain elevated, and the persistence of ETF inflows will determine whether Bitcoin can regain upward momentum after the data release.”