The inflation numbers came in hotter than anticipated; what comes next?

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  • Consumer prices increased by 8.2% compared to September of last year and by 0.4% from August, according to the Labor Department. In September, U.S. consumer prices increased to a 40-year high as measured by the core CPI, which excludes volatile food and energy costs.
  • The likelihood of a rate hike of 50 basis points decreased from 58% the previous day to 36.9%. Over the past month, the likelihood of a rate increase of 100 basis points increased marginally from 0% to 1.4%.
  • Following Thursday’s higher-than-expected Consumer Price Index, Bitcoin dropped nearly 7% to $18,200.
  • Ethereum (ETH) deflation is brought on by the hype around the XEN cryptocurrency project.
  • Q3 earnings Four banks — Citigroup, JP Morgan, Morgan Stanley, and Wells Fargo — each reported their results on the Friday of last week, marking the season’s official start.

Bitcoin’s recent price range has been rather stable, and the release of gloomy inflation data and other gloomy economic statistics this week did little to change that.
The market’s response to the Consumer Price Index (CPI) report was a major factor in the exception’s occurrence on Thursday. Following a higher-than-expected Consumer Price Index on Thursday, Bitcoin fell by roughly 7% to $18,200 after remaining unchanged for the majority of the week. The price did, however, manage to stage a stunning comeback, rising as high as $19,903 by Friday lunchtime before tumbling down to the $19,100 level all the way through Sunday.

Kunji trading view

Additionally, the historical volatility index (BVOL) for bitcoin has fallen to a two-year low (2020), indicating that volatility is currently being squeezed for bitcoin. Shortly, the price of bitcoin might see a significant change.

Kunji - Tradingview
Source : Tradingview

Since the post-Merge phase, the price of ETH has fallen out of favor and is currently reflecting the bearish trend that rules the rest of the market. From its $2,000 peak, ETH’s price has decreased by 30% since the Merge. However, a new project named XEN Crypto has already absorbed almost half of Ethereum’s block space, which is driving up gas prices and decreasing network issuance.
The result is that starting October 8 the Ethereum supply has been decreasing. As of right now, the asset has been deflationary, at least temporarily, according to the Ultrasound Money dashboard, which shows a -0.15% supply growth.

After the U.S. CPI, Treasury yields are still high, providing riskier assets, like cryptocurrencies, with a dose of realism. The likelihood of a 75 basis point hike in the federal funds rate following the release of the CPI rose from 85% the day before to 95% in response to the CPI, according to the CME FedWatch tool.
Currently, there is a 5% chance that there will be a 100 basis point jumbo hike. In contrast to the terminal rate of 4.65% priced in advance of the inflation data, the money markets now anticipate that the Federal Reserve’s interest rate hiking cycle will peak near 5%.

Source : CME FedWatch tool

Concluding Thoughts:
Global economies are in trouble, and the United States and many other nations continue to struggle with persistently high inflation. Bond prices are volatile, and a growing debt crisis becomes more apparent every day. Risky investments like cryptocurrencies are extremely unpredictable, and even the most reliable price trends (regardless of whether they are supported by fundamentals or not) are subject to the whims of macro factors like the stock market, geopolitics, and other market events that affect investors’ sentiment.

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