30s Summary

Bitcoin’s price might fluctuate due to anticipated increases in headline inflation and implied volatility in the US. Following Trump’s election win, the cryptocurrency market moved from $2.2 trillion to $3 trillion, pushing Bitcoin up to $90,000 before US equity markets closed on November 12. The YoY consumer price index is anticipated to rise from 2.4% to 2.6%, indicating uncontrolled inflation. Blockchain analysis platform, Glassnode, suggests that elevated implied volatility, due to Bitcoin’s significant price surge, could cause more price variation in Bitcoin.

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For the first time since March 2024, the headline inflation year-over-year increase is expected to go up by 0.2%, reaching 2.6%. Last week, Bitcoin’s 30-day implied volatility shot up to 90% and could lead to more turbulence when U.S. inflation data is revealed.

On Wednesday, the upcoming U.S. inflation report might disturb the peaceful 48-hour period that Bitcoin has enjoyed, causing the price to fluctuate. This past week has been quite dramatic for cryptocurrencies, with the total cryptocurrency market fluctuating between $2.2 trillion and $3 trillion following Donald Trump’s win in the U.S presidential election on November 6. During this period, Bitcoin skyrocketed to touch $90,000 right before U.S. equity markets closed on November 12.

The cost of living in the U.S, which is represented by the U.S. consumer price index (CPI), is expected to have risen by 2.6% year-on-year in October, which is up from the 2.4% rise seen the previous month. The challenge the Fed faces is the ongoing issue of core inflation year-over-year, which has already risen from 3.2% to 3.3% in September, since dropping from 3.9% earlier this year.

Concerns that inflation is not under control are evident in soaring U.S. yields since the Federal Reserve initiated the rate-cutting cycle. This began with a 50bps rate cut, followed by a further 25bps rate reduction, leading to a jump in U.S. 10Y from 3.6% to 4.4% since the first rate-cut on September 16. With the U.S. 3-month treasury yield trading at 4.6%, which follows the effective federal funds rate, it seems likely that no more than 25bps of rate cuts will occur over the next three months, as the current target rate is 450-475.

In addition to the anticipated rise in headline inflation YoY, a spike in implied volatility could potentially lead to a significant price swing for Bitcoin later today.

There was a noticeable uptick in implied volatility for options contracts set to expire a week from now, from 40% up to 90%, due to Bitcoin soaring to $90,000, a more than $20,000 increase since November 6. Implied volatility, according to Glassnode, is the market’s prediction of volatility. Contact with At-The-Money (ATM) IV over time provides a normalized view of volatility expectations, which typically fluctuate with realized volatility and market sentiment.

Looking back, inflation data releases brought negative volatility to Bitcoin in the first quarter. The cryptocurrency’s performance was shaky when inflation rates were almost double the inflation target. For instance, Bitcoin fell as far as 7.5% when U.S. reported a higher-than-expected inflation figure for December on January 12.

This trend changed in the latter half of the year, with Bitcoin prices improving when the headline inflation YoY rate began to slow down. In fact, Bitcoin registered a 6.7% price increase on July 15. However, as inflation is expected to bounce back, markets will need to brace for potential volatility.