Bitcoin Traders Are Surprisingly Calm Ahead of CPI and the Fed: Is a Big Move Coming?

Bitcoin has spent the past several days struggling to decisively break past $80,000, and options traders don’t appear too concerned about an imminent volatility explosion despite the major economic events in the next ten days.

QCP Capital’s latest market analysis suggests that BTC’s 18-day at-the-money implied volatility currently sits at just 37%-38%, despite the upcoming US inflation report and the subsequent FOMC meeting.

Waiting for Clarity

The analysts believe the volatility compression reflects a market waiting for additional information rather than traders expressing strong directional conviction. This narrative received some confirmation last week after the release of the August jobs report, which significantly exceeded expectations, with the US economy adding 162,000 jobs compared to forecasts of around 55,000. Unemployment remained at 4.1% while average hourly earnings increased 0.3% MoM.

The reading strengthened the argument that the US remains resilient and shifted attention back toward inflation and the Fed’s next move. Markets now assign a 58% probability of a 25-basis-point rate hike at the September 15-16 meeting.

Major institutions have also turned hawkish, especially after Kevin Warsh’s speech at the end of August. UBS expects the central bank to raise rates in September and also in December after previously forecasting no changes this year.

Aside from a brief retracement by a few grand, Bitcoin has remained resilient, surging past $82,000 last week before it calmed at just under $80,000.

CPI Can Tilt the Market

The next big test comes with the August inflation data, to be announced during the current big economic week. Producer inflation will provide the first signal on Thursday, followed by the considerably more important Consumer Price Index on Friday.

The latter could materially alter expectations surrounding the upcoming Fed decision. As usual, a hotter-than-expected reading would provide the central bank more leeway for a rate hike, potentially pushing Treasury yields higher and creating additional pressure on risk assets like bitcoin.

The inflation threat has become particularly relevant as oil prices continue climbing amid renewed US-Iran strikes. Brent crude neared $100 per barrel on Monday, while markets are already assigning increasing probabilities to rate hikes from several major central banks.

A softer reading could reduce the pressure on policymakers to act and potentially provide BTC with the catalyst to finally break through $82,000. Nevertheless, QCP’s analysts do not expect a dramatic breakout in either direction.