Cryptocurrency traders have had a tough time over the past 24 hours as Bitcoin Prices fluctuated wildly between $86,000 and $90,000.
Things could get even more exciting later on Thursday with the release of key U.S. inflation data for November. That will put a new spotlight on price pressures in the economy after a record government shutdown canceled October data and left the Fed in the dark.
What the data might show
The data is expected to show the headline consumer price index (CPI) rose 3.1% year-on-year in November, up from 3% in October, according to FactSet consensus forecasts. Excluding volatile food and energy prices, core inflation is expected to be 3.1%.
That’s still a full percentage point above the Fed’s 2% target, which could encourage Fed hawks to lower their rate cut expectations. As of this writing, markets expect the Fed to cut interest rates at least twice by 25 basis points next year.
Expert opinion
Dr. Mohamed A. El-Erian, dean of Queens College, University of Cambridge, adjunct chief economic adviser to Allianz Group and chairman of Gramercy Fund Management, said on
He added that markets will be watching for two things: whether the deflationary trend in the services sector has stronger support and whether the remainder of tariff-driven prices will be passed on in good inflation.
Why Bitcoin Might React
If the data confirms deflation, it may prompt the market to price in further interest rate cuts in 2026, thereby stimulating risk-taking in financial markets. Note, however, that Bitcoin did not show a sustained bullish reaction to the employment data released on Tuesday, which showed that the unemployment rate reached its highest level since September 2021.
Additionally, despite the Federal Reserve’s easing policies, the 10-year Treasury yield has remained above 4% in recent months. This is partly due to uncertainty about inflation, with CPI rising steadily from 2.3% in May to 3% in October.
Yields on longer maturities, such as the 10-year, incorporate investors’ bets on inflation trends, economic growth and the path of Federal Reserve policy. Higher yields signal stronger expectations in these areas and increase the appeal of fixed income instruments, thereby reducing the appeal of risk assets.
Against this backdrop, a stronger-than-expected inflation report could boost yields further, complicating the situation for Bitcoin bulls.
Crypto Challenge
Note that cryptocurrency-specific factors don’t help either. For example, Morgan Stanley Capital International’s (MSCI) review of digital asset Treasuries has posed significant headwinds.
The market insights team of QCP Capital in Singapore said: “MSCI is reviewing the index qualifications of digital asset finance companies and may exclude companies holding more than 50% of cryptocurrencies. If enacted, passive fund outflows may be as high as $2.8 billion, adding pressure to an already fragile market.”