[Statistics] CPI Release Date Equals Payday? Check out How Is Bitcoin Doing After the Inflation Data

Consumer Price Index (CPI) is one of the most popular measures of inflation and deflation. As deflation happens only once in a blue moon, CPI is also known as inflation data. This data is scheduled to release on a monthly basis, and it’s one of the most important economic events to the market participants. All the financial instruments – stocks, bonds, crypto, forex, gold, you name it – will be heavily affected by the result of the CPI. To define whether inflation is easing or worsening, one of the simplest ways is to look at the actual data versus the forecast data. If the actual CPI is higher than the forecast, this means that the inflation is actually worse than the expectation, and vice versa. Hence, you may expect high market volatility soon after the release of CPI data. Of all CPI data in the world, the U.S. CPI has the highest impact on the financial market.

On September 13th, the U.S. Bureau of Labor Statistics revealed that the U.S. CPI increased by 8.3 percent in August compared to the same time last year and increased 0.1 percent from the previous month. The rise was worse than the 8.1 percent increase that economists had expected. A worse-than-expected inflation data will often drive down the financial market, and this time is no exception. All three major U.S. stock indexes plummeted, notching the worst one-day performance in two years. The fears quickly spilled over to the crypto markets, with bitcoin closing down 9.9% on Tuesday.

However, traders and speculators are more than happy to welcome high market volatility, be it going up or down. Their trading strategy can be as simple as this: “short” if the CPI data is worse-than-expected; “long” if it is better-than-expected. Let’s see whether this simple strategy works out.

There are a total of 9 CPI data released thus far in 2022: 1 better-than-expected, 2 in line with expectations, and 6 worse-than-expected. Taking out the 2 neutral CPI data, we now have 7 samples to prove the above trading idea. The one and only better-than-expected CPI data which happened in August, bitcoin saw its gain of 4.6% in the first hour of trading, and the gain was later expanded to 6.7% in 24 hours.

Meanwhile, for the 6 bad inflation data, bitcoin was trading in a loss 5 out of 6 times (83%) during the first hour, and the loss was further expanded 3 out of 5 times (60%). If we are looking at just the bitcoin price 24 hours after the release of the worse-than-expected CPI data, 5 out of 5 times (100%) bitcoin is trading lower than its opening price.

While the data did prove that the trading idea is working wonders, it is not easy to get first-hand CPI data, and often the bitcoin price has already been reflected before we even see the actual data. Nevertheless, with enough experience in trading, the CPI release date can be an extra payday.

Disclaimer: The information and publications are not intended to be and do not constitute financial advice. Trading cryptocurrencies carries various risks and is not suitable for all people. Anyone wishing to invest or trade should seek expert advice, and always ensure a full understanding of these risks before starting.