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Bitcoin, Ethereum, XRP face sharp volatility as US posts lowest inflation rate in years

  • Bitcoin, Ethereum and XRP saw increased volatility following the US CPI report for November.
  • The US headline inflation dropped to 2.7% while core CPI fell to 2.6%, its lowest level since March 2021.
  • The Nasdaq and S&P 500 also posted gains as rate cut expectations surfaced.

The latest inflation report released on Thursday in the United States (US) sparked a wave of volatility in the crypto markets. The US Consumer Price Index (CPI) rose 2.7% YoY in November, below forecasts of 3.1%, and lower than September's 3.0% reading, according to the Bureau of Labour Statistics (BLS).

Core CPI, which excludes food and energy prices, climbed 2.6% YoY, a 40 basis-point drop from market expectations and September's 3.0%. That figure represents the Core CPI's lowest reading since March 2021 and is closer to the Federal Reserve's (Fed) 2% inflation target.

Following the report, Bitcoin (BTC) jumped about 2% over the next few hours, edging toward $90,000. Ethereum (ETH) climbed above $2,900, while XRP and Solana (SOL) also posted modest gains.

Underlying bearish structure drags down prices

However, the top cryptos quickly reversed most of these gains, aligning with the underlying risk-off structure that continues to hold back the market.

Options data indicate that traders expect a price drop as year-end approaches.

"30-day BTC volatility has climbed back toward 45%, while skew hovers around -5%. Longer-dated skew is also anchored around -5%, signalling that traders are pricing continued downside risk through Q1 and Q2, as ongoing sell pressure from previously inactive wallets weighs on spot prices," wrote Nick Forster, founder of onchain options platform Derive.

He highlighted that puts have built significant exposure around the $85,000 strike price, indicating that traders expect prices to slide below the level. However, there's also a notable buildup of calls around the $100,000 and $120,000 strikes.

Meanwhile, the earlier price rise wasn't limited to the crypto market, as major stock indices, the S&P 500 and Nasdaq, rose by 1% and 1.5%, respectively, at publication time on Thursday. The move sparked discussions around a potential rate cut in the Fed's January meeting.

Author

Michael Ebiekutan

With a deep passion for web3 technology, he's collaborated with industry-leading brands like Mara, ITAK, and FXStreet in delivering groundbreaking reports on web3's transformative potential across diverse sectors. In addi

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