Bitcoin's been on a wild ride the last couple of days with the US CPI and PPI data being released. Inflation is the main topic in the overall finance world as nobody really knows what is going to happen, but speculation is certainly mounting. So let's talk a look at Bitcoin's reaction to the CPI and PPI interest rate data.
What Is The CPI
So, there's this report called the Consumer Price Index (CPI) that tells us about inflation. Every month, the government gathers a bunch of price info from stores and businesses all over the country. Then, they crunch the numbers to see if prices went up or down compared to before. The CPI gives us a sneak peek into inflation, which is when prices go up over time. If inflation's high, it means our money doesn't go as far, and things get more expensive. That can affect everything from how much we pay for rent to how much we shell out for a slice of pizza.
The latest report, out on April 10th, said inflation's still high. The CPI went up 0.1% from last month and 5.0% from last year. That's a bit more than folks were expecting. Investors weren't too happy about it. They were hoping inflation would slow down more.
Bitcoin Takes a Tumble
When this news hit, Bitcoin took a bit of a nosedive. It dropped over 3%. That might not sound like much, but in the world of crypto, it's kinda a big deal. People were shrugging off Bitcoin's recent record highs because of this inflation stuff. They were worried that the Federal Reserve might keep interest rates high for longer to tackle inflation. This shows that the economy may not be as strong as everyone thinks it is, so investors and traders will sell some of these higher volatile assets and go into the dollar, which gives it more strength for a time.
But Wait, There's More
Then, this morning, we got another report called the Producer Price Index (PPI). It showed that wholesale inflation might not be as bad as we thought. The PPI only went up 0.2% in March, less than experts predicted. That's a bit of good news for the Fed.
The PPI gives us a heads-up on what's happening with inflation before it trickles down to us consumers. If businesses are paying more for their stuff, they might jack up prices on the things we buy eventually. So, keeping an eye on the PPI helps us prepare for potential price hikes down the road.
With the PPI news coming in a bit lower than expectations, that got the speculators excited and the price of Bitcoin shot up over 1% in the matter of minutes along with the major stock indexes. This created a nice little price pop for the short period between when the PPI data came out and the market open. After the Wall Street bell rang, things took a turn.
You might be wondering how all this ties back to Bitcoin. Well, if the PPI is going up too fast, it could signal trouble ahead for the economy. That might make people nervous and drive them to invest in assets like Bitcoin as a way to safeguard their money. But for a brief time, traders were optimistic and prices pumped, but over a measly 0.1% difference from the expected figures, so when the markets opened, the institutions put the market back in it's place as we continue in our distribution range we have been in for weeks at this point.
So to wrap it up, CPI and PPI data releases have been known to move the price of Bitcoin one way or the other based on the difference between reported and expected numbers which shows how the economy is doing. Day traders should use this information to trade on the volatility when these days happen to capitalize the price movements. Remember, this happens once a month! You can track it on the Coin Logic Markets page under the TradFi tab! Just scroll down and look for the Economic calendar and keep track of important economic dates! So now you have a better understanding of Bitcoin's reaction to the CPI and PPI interest rate reports and how traders can logically ride the waves when these reports are released every month!
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Many of my cryptocurrency related articles as well as trading articles can also be found on my crypto research site, Coin Logic.
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Disclaimer:
The information in this trade journal is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor before making any investment decisions.
