Cryptocurrency prices rally in disinflation trade, Bitcoin bulls fight US CPI jitters

The US Bureau of Labor Statistics will release CPI data for November on December 13 at 14:30 GMT. Experts anticipate the inflation rate to slow for a fifth straight month to 7.3% in November 2022. Bitcoin price printed its weekly and December high, analysts argue disinflation trade has gotten ahead of itself. 

Also read: Bitcoin continues trading sideways, will BTC break out of limbo with US PPI data release?

US CPI data for November could indicate slowing inflation 

The US Bureau of Labor Statistics, a principal fact-finding agency for the United States government will release US Consumer Price Index(CPI) data for November soon. Inflation rate is expected to drop 0.4%, from 7.7% in October to 7.3% in November 2022. 

This would mark the lowest inflation rate since December 2021. The Consumer Price Index measures the change in the prices of goods and services contained in a basket of consumer items and this plays a key role in price stability in the US economy. Therefore, the central bank pays very close attention to this figure. 

Core CPI, which leaves out volatile food and energy prices, is released at the same time and is expected to come out at 6.1% from 6.3% previously, and to maintain a MoM change of 0.3%. Core CPI is arguably as important, if not more, than the headline figure in terms of its impact on financial markets.

US CPI data is key to crypto traders as Bitcoin and cryptocurrency prices crumble under the prospect of higher inflation. 

Thus given the possibility of a softer-than-expected inflation print, Bitcoin price has already printed weekly and December highs. The largest asset by market capitalization hit a new monthly and weekly high of $17,479 just a few hours before the release. 

While Bitcoin continues to trade 74.8% below its all-time high of $69,044, a reduction in core CPI could increase capital inflows to risk assets. Reduction in the inflation rate supports the bullish thesis for a cryptocurrency price rally in Q4 2022. 

How will Bitcoin and cryptocurrencies react?

With Bitcoin printing a new high in December 2022, hours before the US CPI inflation data release, experts believe the disinflation trade may have gotten ahead of itself. Disinflation is a temporary slowing down of the pace of price inflation. When the inflation rate reduces marginally over the short term, traders expect prices of cryptocurrencies to recover. 

BTC/USDT price chart 

It remains to be seen how Bitcoin price and crypto market capitalization reacts to US CPI data when it is eventually released as traders are already frontrunning the market ahead of the data. Sometimes this creates what is known as a “buy the rumor, sell the fact” effect whereby traders buy the asset in anticipation of the positive result only to sell it when the result actually becomes officially known. Thus investors should take care, as always, when timing their trades in volatile financial markets.