Short Term Crypto Rally Likely After US CPI Data Release?

US CPI Data: The release of consumer price index (CPI) for January by the U.S. Bureau of Labor Statistics could likely have a significant ripple effect on the markets for the weeks to come. Amid hopes of the US economy further going the disinflationary way, the Federal Reserve committee in its recent meeting slowed down the rate hike pace, leading to a positive effect on the markets. Both the stocks and cryptocurrencies found optimism in the Fed’s hopes in the economy’s path towards disinflation in coming months. In this context, traders are predominantly anticipating a reduction in inflation for January, which would reinforce the overall market sentiment in the same direction.

Also Read: US CPI Set To Decline? Here’s What Trends Suggest

Crypto Rally To Fade Away Soon?

If the CPI data comes out to be in the range of market expectation at 6.2% year-over-year, a widespread market rally is likely to happen. However, such a rally could likely sustain only for a short duration, as per JP Morgan analysts. In such a scenario, this could come out to be another ‘buy the news’ event for crypto traders. The U.S. Dollar Index (DXY), which has an inverse correlation with Bitcoin (BTC), is showing clear signs of chances of an upcoming rally. Futures linked to Dow Jones, S&P 500 and Nasdaq are trading in positive territory in anticipation of the inflation data.

Whether or not the crypto market gets a breakout from the current range largely depends on the macro sentiment. After having broken the correlation from stock market after the FTX collapse, Bitcoin (BTC) price is responding in proportion with the markets. Any support from the CPI data momentum could potentially help crypto price recover from the bearish sentiment thanks to the recent regulatory pressures around Binance BUSD. However, it remains to be seen how long would such a bullish momentum continue in the crypto market.

Also Read: Bitcoin Price Likely To Hit $25K After US CPI Data, Here’s Why

As of writing, Bitcoin price stands at $21,852, up 0.71% in the last 24 hours, according to CoinGape price tracker.

Anvesh reports major developments around crypto adoption and trading opportunities. Having been associated with the industry since 2016, he is now a strong advocate of decentralized technologies. Anvesh is currently based in India. Follow Anvesh on Twitter at @BitcoinReddy and reach out to him at [email protected]

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.