Will US CPI Data and Fed Rate Cuts Drive the Next Crypto Rally?

Bitcoin, Ethereum, and Altcoins Watch US CPI Data for Market Moves

Can one number change the direction of the crypto market? The upcoming september US CPI Data, which measures inflation, could do just that. It will be released at 8:30 a.m. ET, and investors across stocks, gold, and crypto are watching closely. The market expects inflation to rise 3.1% from a year ago, up from 2.9% last month.

Source: X (formerly Twitter) 

This report is important because it’s the first major data release since the 24-day U.S. government shutdown ended. It also comes just a week before the next Federal Reserve meeting making it one of the most-watched CPI reports of the year.

Fed Rate Cut Hopes Hang on the Consumer Price Index Report

The market now expects a 25-basis-point fed rate cut next week, with a 98% probability, according to the fed watch tool by CME. But the US CPI Data could change that. 

Source: FedWatchTool

Three Scenarios and Their Impacts

• If September Report comes in above 3.1%: This outcome is bearish for risk assets. It could indicate that inflation remains sticky, pushing the Fed to hold off on easing and causing liquidity to tighten, which would dampen crypto and equity markets.

• If the reading equals 3.1%: That means inflation grew by 0.2% MoM (about 2.4% annualised). While in line with expectations, it still points to inflation above the Fed’s 2% target, possibly prompting a hawkish tilt that could weaken market confidence. 

• If it comes in under 3.0%: This is the favourable scenario for risk-on assets. Easing inflation could increase the likelihood of rate cuts, boost liquidity, and support rallies in cryptocurrencies and equities. 

Stock and Gold Markets Send Mixed Signals

Traditional markets are already showing signs of nervousness. The S&P 500 closed at 6,738, up 0.58%, suggesting cautious optimism before the release of the economy indexes. But that optimism could fade quickly if the CPI print is more than expected.

Gold, on the other hand, fell slightly by 0.47% to $4,126.30, signaling that investors are cautious. Meanwhile, Bitcoin rose 2.16% to $111,203, showing stronger risk appetite as traders position ahead of the US Consumer Price Index Report. 

Crypto Market Eyes US Economic Data for Direction

The crypto market has been slowly recovering. Total market capitalization is at $3.72 trillion and has risen by 1.84% within the previous 24 hours. 

Bitcoin is trading around $111,200, while Ethereum is at about $3,969. This increase is attributed to expectations that the Fed will begin reducing interest rates in the near future.

Source: CoinMarketCap

Nevertheless, Bitcoin's 90-day performance is down by approximately 6%, indicating that investors are not yet completely convinced. Altcoins such as Solana and XRP have also edged marginally higher, but actual momentum could only be seen after US CPI Data confirms that rate of prices eases.

What Comes Next

If inflation slows down, it may lead to greater liquidity, greater risk-taking, and stronger crypto prices. But if the US CPI Data is higher, the reverse is possible: Bitcoin may find it difficult to hold above $108,500, while Ethereum may experience selling pressure around $3,950.

For the moment, the whole crypto universe is holding its breath for tomorrow's figure. The US CPI Data will determine whether to make room for a new rally or another correction in Bitcoin, Ethereum, and other cryptocurrencies.

Disclaimer: This article is for information purpose only and not a financial advice, consider to do your own research before investing in crypto markets.