This Friday, Wall Street is holding its breath. The US Department of Labor is preparing to unveil inflation figures under unusual circumstances: amid total government shutdown and just five days before the Fed decides on rates. For Bitcoin and crypto markets, every decimal will count.
Key Takeaways
- •The Department of Labor is releasing the Consumer Price Index (CPI) this Friday, October 24, despite the ongoing US government shutdown.
- •This announcement is particularly noteworthy as it occurs just five days before the Federal Reserve's scheduled meeting on October 29.
- •Bitcoin has seen a rebound, reaching $111,049, partly influenced by easing Sino-American trade tensions.
- •Any inflation data exceeding 3.1% could potentially alter market expectations for a rate cut.
An Unusual Inflation Announcement Worries Crypto Investors
The timing of the announcement is intriguing. For the first time since January 2018, US CPI inflation data will be released on a Friday. Even more surprising is that this publication is happening during a period of public administration paralysis due to the government shutdown.
The Department of Labor has exceptionally recalled some employees to ensure the dissemination of the figures, which were initially scheduled for release last week.
This decision, described as “unusual” by the Kobeissi Letter, raises questions. Why mobilize resources during the shutdown for this specific data? The timing is even more striking as it comes just five days before the Federal Reserve’s monetary policy decision. Financial markets, which have been operating with limited major economic reports, are now watching this number nervously.
Jerome Powell has already indicated a potential 25 basis point rate cut. However, this prospect could be jeopardized if inflation rises above 3.1%. Such a scenario would place the Federal Open Market Committee (FOMC) in a difficult position, balancing the need to support the economy with the imperative to control price increases. The CME FedWatch tool currently estimates a total of 50 basis points in rate reductions for the year, but significant uncertainty remains.
The crypto market, which is highly sensitive to monetary policies, is already showing signs of reaction. Jack Mallers, head of Strike, anticipates a rebound, citing recent banking sector tensions. The presence of non-performing loans from Western Alliance and Zions is fueling speculation of monetary easing that could benefit digital assets.
Ryan Lee, chief analyst at Bitget, supports this outlook:
The expected 25 basis point cut could be a liquidity catalyst for crypto markets. Lower borrowing costs generally stimulate risk appetite, potentially triggering gains of 5 to 10%.
Bitcoin Rides on Trade Optimism
Cryptocurrency markets are showing a spectacular rebound. Bitcoin has climbed 3% to reach $111,049, with trading volumes experiencing a significant increase of 75% in the last 24 hours.
This surge in market optimism coincides with easing trade tensions between Washington and Beijing. Remarks from Donald Trump regarding Chinese tariffs have reassured markets, contributing to a drop in gold prices from their historical peak of $4,375.
Investors are anticipating a "bullish CPI" report that would further solidify expectations for a rate cut. Data from Coinglass reveals substantial buying activity in derivatives, suggesting a potential short squeeze for bitcoin. Ethereum has also seen a rebound, trading above $4,000, while BNB and XRP have gained 3% and 4.5%, respectively.
The scheduled meeting this week between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng is fueling this optimism, laying the groundwork for a potential Trump-Xi summit later this month. Analyst Ted Pillows has identified $112,000 as a critical resistance level, noting, “Bitcoin holds, but sentiment remains cautious.”
This favorable context is further amplified by a significant institutional development. The Federal Reserve held a historic payments innovation conference on Monday, officially welcoming major cryptocurrency companies for the first time.
Prominent figures such as Sergey Nazarov from Chainlink, along with the heads of Circle, Paxos, and Coinbase, participated in discussions alongside representatives from BlackRock and JPMorgan. This marks a substantial shift after years of regulatory skepticism towards the crypto sector.
The upcoming CPI release this Friday is poised to be a key determinant of the direction for crypto markets in the coming weeks. Navigating between geopolitical easing and monetary policy uncertainty, bitcoin faces a complex landscape. However, the Fed's historic opening to the digital asset sector could fundamentally redefine the industry's future.