Bitcoin to Experience Volatility Today as U.S. Inflation Figures Expected to Rise: Van Straten.

Bitcoin Braces for Potential Volatility as U.S. Inflation Set to Break Six-Month Downtrend

The much-anticipated U.S. Consumer Price Index (CPI) report, due Wednesday, could jolt bitcoin (BTC) markets out of their recent calm. After a whirlwind rally in the cryptocurrency market, traders are on edge, anticipating fresh inflation data that may end a six-month streak of year-over-year declines.

Crypto Market Rollercoaster

It has been an eventful week for cryptocurrencies, largely fueled by Donald Trump’s victory in the U.S. presidential election. The total crypto market capitalization surged from $2.2 trillion to a peak of $3 trillion, before retreating slightly to $2.8 trillion, according to TradingView. Bitcoin briefly touched an all-time high of $90,000 on Nov. 12 before consolidating below that level.

Inflation Report Holds the Spotlight

The October CPI report is expected to show a year-on-year increase of 2.6%, up from September’s 2.4%, according to FXStreet. If realized, this would mark the first acceleration in headline inflation since March, signaling persistent cost pressures despite the Federal Reserve’s recent rate cuts.

Core inflation, a key measure that excludes volatile food and energy prices, has also shown signs of stickiness, rising to 3.3% in September after hitting a low of 3.2% earlier this year.

Bond Yields and Inflation Worries

Rising inflation expectations have pushed U.S. Treasury yields higher. The 10-year yield climbed to 4.4%, up from 3.6% when the Federal Reserve began its rate-cutting cycle in September. The 3-month Treasury yield has also risen, suggesting the market is pricing in only limited further cuts to interest rates.

Higher yields generally strengthen the U.S. dollar, which can weigh on risk assets like bitcoin by increasing the opportunity cost of holding non-yielding assets.

Implied Volatility Spikes

Options markets indicate growing expectations of price swings. Implied volatility for bitcoin options expiring in a week has soared from 40% to 90%, reflecting uncertainty as the cryptocurrency consolidates near its $90,000 peak. Historically, higher implied volatility has preceded significant price moves, making this data a key metric for traders.

Bitcoin’s Track Record with CPI Releases

Inflation reports have been a mixed bag for bitcoin this year. In January, a stronger-than-expected CPI print drove a sharp 7.5% drop in BTC prices. However, as inflation cooled midyear, bitcoin began reacting positively, with a notable 6.7% rally on Jul. 15 when CPI data signaled slowing price pressures.

As inflation now shows signs of ticking higher, it remains to be seen whether bitcoin’s response will mirror its early-year bearish tendencies or defy expectations with a bullish breakout.

Markets on Edge

With inflation poised to rebound and options traders betting on heightened volatility, bitcoin markets may be gearing up for a significant move. Whether the next leg is up or down could depend on how today’s inflation report reshapes expectations for monetary policy and economic growth.