Crypto Bitcoin BTC BTCUSDT Macro

Encryption through a macro lens

The cryptocurrency market is being crushed by macroeconomic factors as the big cryptocurrencies continue to push back to their previous support levels. Despite today’s red trading session, these assets continue to trade in a tight range and low volatility environment.

A report by Arcane Research claims that the print of the Consumer Price Index (CPI), due to be published on Thursday, may change the status quo. First, the research expects the metric to unleash volatility across an emerging asset class.

In 2022, CPI events triggered surprising price moves as market participants priced in potential decisions from the US Federal Reserve (Fed). The consumer price index is the benchmark for inflation in US dollars and has been the dominant factor behind the shift in monetary policy from the financial institution.

For now, the print of the September 2022 CPI could provide a deeper insight into the Fed’s rationale and future decisions. As noted by Arcane Research, the CPI reading for August was above market expectations.

As a result, Bitcoin and the crypto market trended lower and were rejected from key resistance levels. The next CPI print is higher than expected, and the cryptocurrency could revisit its yearly lows of $17,600. The research firm noted:

Annual forecast for the highly anticipated CPI release on Thursday 14:30 CET is expected to be 8.1% with monthly CPI growth of 0.2% and core CPI growth of 0.5%.

BTC price trends are dropping on the hourly chart. source: BTCUSDT TradingView

The crypto market is all about the macro

As investors and institutions turn their attention away from bullish crypto events, such as the Ethereum “Merge,” the correlation between digital and traditional assets is increasing. In the past couple of months, crypto has been moving along with major traditional stocks.

As seen below, Bitcoin managed to outperform one of these two benchmarks, the Nasdaq 100, but the S&P 500 remained and showed the best performance. However, crypto remains relatively strong from major support, and BTC managed to hover around its all-time high in 2017.

Cryptocurrency market Bitcoin BTC BTCUSDT
Source: Arcane Research

Meanwhile, since the major macroeconomic events of September, the traditional and digital asset classes continue to increase their correlation. On the latter, Arcane Research noted:

Since the last CPI release, Bitcoin has slightly outperformed the Nasdaq while it has slightly underperformed the S&P 500. However, on a relative strength basis, BTC has held up quite solid lately. BTC recovered from the Federal Open Market Committee (FOMC) on September 21.

Additional data provided by the trading desk QCP Capital coincides with the increased correlation between digital assets and traditional markets. The company argues that this status quo will remain as long as there is no new narrative in cryptocurrencies.

Market participants are betting on the potential Federal Reserve pivot from their current monetary policy. The financial institution is starting to receive pressure from international bodies, and major hedge funds, but the market is not pricing this prospect as a short-term potential.


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