Crypto: The report on American inflation — A double-edged sword!

The long-awaited moment has finally arrived: today the U.S. government is revealing October’s inflation figures, an announcement that could give new momentum to the recent surge in Bitcoin.

Will the U.S. Inflation Report Determine the Fate of Crypto?

After a fruitful five-week period that propelled Bitcoin to nearly a 40% increase, the crypto is treading water around the $37,000 mark. With the excitement surrounding the prospect of a green light for a Spot Bitcoin ETF temporarily falling, investor attention is now turning to Tuesday’s Consumer Price Index as a potential growth trigger.

The anticipated report on October’s CPI suggests a slowdown in inflation compared to previous months. Economists expect a monthly rate of 0.1%, down from September’s 0.4%. Year-over-year, inflation is expected to drop from 3.7% to 3.3%. 

Although these figures are well above the 2% target set by the U.S. Federal Reserve (Fed), a gradual pullback in inflation could influence the Fed’s interest rate decisions.

A Favorable Environment for Crypto

If the report confirms a weakening of inflation, the Fed could slow down the pace of rate hikes, or even consider reducing them in the long term. Lower rates make risky assets like Bitcoin more attractive to investors, reducing the opportunity cost compared to risk-free investments.

A slowing of inflation and less aggressive monetary policy from the Fed would create a more favorable environment for Bitcoin and cryptocurrencies. Their status as assets uncorrelated with traditional markets and their hedge potential against inflation would come to the fore in the minds of investors.

The outcome of the inflation report remains uncertain, but its impact on the prospects of Bitcoin and cryptocurrencies will be significant. 

A confirmation of the “soft landing” scenario hoped for by the Fed could limit the risks of a sharp recession, thereby strengthening market confidence. On the other hand, persistent inflationary pressures would likely keep the Fed on the path of a restrictive monetary policy, weighing down on the bullish potential of Bitcoin, which is sensitive to overall market liquidity.

Either way, Bitcoin’s future is closely connected to the economic decisions that will take shape in the coming days.