The upcoming U.S. inflation report for March is anticipated to be a significant indicator for many observers, especially against the backdrop of the ongoing war in Iran and its potential inflationary effects. Despite this, recent activity in the Bitcoin market suggests that traders do not foresee inflation data as a major market mover. According to Markus Thielen, founder of 10x Research, the Bitcoin market is currently pricing in only a 2.5% swing in either direction linked to the inflation announcement. This probability is derived from options and derivatives pricing, reflecting traders’ expectations for Bitcoin’s movement in response to the data.
A 2.5% swing falls well within Bitcoin’s recent average volatility, indicating a lack of anticipation for any significant directional changes stemming from the inflation data. This sentiment is mirrored in the widely tracked 30-day implied volatility index, which has slipped to 46.5%, marking its lowest level since January 31, according to TradingView. The index suggests an expected daily move of approximately 2.9%, notably under the 30-day average of 3.4%. Such implied volatility is calculated based on options demand and illustrates traders’ outlook on price fluctuations for the near term.
Interestingly, many traders are approaching the upcoming consumer price index (CPI) release, scheduled for Friday at 8:30 ET, as a non-event. This attitude appears unconventional given that the report is likely to provide insight into the inflationary consequences of the Iran war, which began in late February. Although the March figures might not fully capture the ongoing situation, they are expected to signal how the Middle Eastern conflict could affect U.S. prices.
In light of recent events, Commerzbank noted that the U.S. inflation figures for March will serve as an initial indicator of the war’s impact on domestic pricing. Following the commencement of hostilities and the resultant energy price surge, interest rate markets have also curtailed expectations for potential Federal Reserve rate cuts this year, as inflation risks have intensified.
The CPI data release is projected to indicate a 3.4% year-on-year increase in the cost of living for March, a considerable rise from February’s reading of 2.4%. Excluding volatile food and energy prices, the core figure is anticipated to rise by 2.7%, up from March’s 2.5% increase. This surge is largely attributed to the rise in fuel and energy prices linked to the Iran conflict, which has seen U.S. gasoline prices exceed $4 per gallon for the first time since August 2022.
Experts assert that macroeconomic conditions, particularly inflation data, remain the primary drivers of market sentiment. Iliya Kalchev, an analyst at Nexo, highlighted that the implications of energy price shocks carry substantial weight for cryptocurrencies. He noted that a softer inflation print could reignite conversations around rate cuts, whereas a stronger report might reinforce a “higher-for-longer” interest rate outlook.
Timothy Misir, head of research at BRN, emphasized that the forthcoming inflation data and the Federal Reserve meeting scheduled for April 28-29 will be key in determining market direction. The outcome of these events could inform policymakers on whether inflation is still seen as manageable in the wake of the ongoing oil shock, or if the situation warrants a continued pause on rate cuts.
In summary, there appears to be a notable disparity between expert expectations regarding inflation data and how traders are pricing it. The results on Friday will ultimately reveal which perspective aligns more closely with market behavior.
