The entire crypto market is on edge today as the US Consumer Price Index (CPI) report is scheduled to be released at 8:30am ET. Economists expect annual inflation to rise to 4.2%, the highest level since March 2023.
Bitcoin is already struggling near $61,000, so stronger-than-expected economic data could put further pressure on the price and cause further declines.
Consumer price index in May is expected to be 4.2%
On June 10th, the U.S. Bureau of Labor Statistics (BLS) will release CPI data for May.
Economists expect the headline CPI to rise to 4.2% in May compared to the same month last year, up from 3.8% in April, which had already risen. If accurate, this will be the first time since March 2023 that the inflation rate has exceeded 4%.
Prediction markets are also leaning towards the hotter view.
At Karshi, 47% of traders expect inflation to reach 4.2%, while the remaining 32% think inflation could reach 4.3%. At the same time, 59% of traders expect core CPI to rise by 0.2% month-on-month, and 35% expect it to rise by 0.3%.
These estimates are well above the Federal Reserve’s long-term inflation target of 2%, suggesting that inflation remains a major concern for policymakers.
What happens if inflation is higher than expected?
Inflation was higher than expected in April at 3.8%, raising concerns that the Federal Reserve will keep interest rates high for an extended period of time. Bitcoin fell nearly 28% following the news, dropping from $82,000 to around $60,000 in less than three weeks.
Rising energy prices are also raising concerns about inflation. Continuing tensions in the Middle East are pushing up oil prices and increasing the cost of transporting goods and services.
Will President Trump’s comments on the Iran deal change the outlook?
There is one factor that could ease inflation fears in the coming months.
According to Coinpedia news, President Donald Trump recently said that negotiations with Iran are in the “final quagmire” and that a deal could be signed within “a few days.” Inflationary pressures could gradually subside if tensions ease and oil prices fall.
This scenario would raise expectations for future liquidity conditions and support demand for risk assets, including cryptocurrencies.
Could Bitcoin test $55,000 next?
Bitcoin’s recent decline is indicative of a shift in macro expectations rather than a crypto-specific problem.
Coinpedia analysts believe that if inflation rates rise above expectations again, Bitcoin could face fresh selling pressure, with the September 2024 support zone around $54,598 emerging as a key level to watch.
However, the weaker-than-expected CPI data could reignite hopes for a Bitcoin recovery.
