Bitcoin Braces for CPI Data Amid Government Shutdown

The Consumer Price Index release scheduled for Friday represents the first major economic data point since the U.S. government shutdown on October 1, creating heightened anticipation across both traditional and cryptocurrency markets. This inflation reading will play a pivotal role in shaping the Federal Reserve’s interest rate decision next week, arriving during a period of significant economic uncertainty where officials and economists lack recent labor market data due to the government closure.

Market analysts from leading financial institutions anticipate a measured response to the CPI data. Tim Sun, senior researcher at digital asset financial services company HashKey Group, told Decrypt that “Bitcoin and the broader market are expected to respond moderately to this week’s key macro event.” This sentiment was echoed by Derek Lim, head of research at crypto market-making firm Caladan, who noted that if U.S. inflation meets expectations with minor deviations, “the most probable outcome is a muted reaction.”

The consensus forecast anticipates headline inflation rising to 3.1% from 2.9%, though data from Truflation, a crypto-based independent macroeconomic data provider, suggests a significantly lower figure of 2.28%. According to Sun, the most probable outcome is a “modest increase or flat reading,” which would align with a narrative of gradual inflation moderation and unlikely to cause significant market disruption.

While the inflation report remains crucial from a policy standpoint, market attention has increasingly shifted toward employment data and ongoing trade policy uncertainty. This focus follows recent comments from Federal Reserve Chair Jerome Powell, who highlighted that strong economic growth does not reflect a weakening labor market. The concern has been amplified by recent U.S.-China trade developments, where both nations have implemented reciprocal tariffs, creating additional uncertainty for global markets.

According to HashKey Group’s Tim Sun, the impact of the CPI data “would largely depend on the magnitude of the surprise,” indicating that a mild overshoot is unlikely to trigger a broad-based selloff as the “inflationary effects of tariff adjustments have already been priced in.” This perspective suggests that markets have largely anticipated the inflationary pressures resulting from recent trade policy changes.

Sun further emphasized that the Federal Reserve tends to focus on “the cumulative direction of inflation rather than one data point,” suggesting that Friday’s CPI reading, while important, may not be decisive on its own. This approach aligns with the central bank’s historical pattern of considering multiple economic indicators before making significant policy changes.

The cryptocurrency market appears more vulnerable than traditional equities heading into the inflation data release. Bitcoin is currently trading 11% below its October 10 high of $122,500, a level that triggered a historic $19 billion liquidation event. In contrast, the S&P 500 index sits just 0.37% from its recent peak, reflecting stronger risk appetite for traditional equities and highlighting the divergent performance between crypto and traditional markets.

Current market conditions show investors adopting defensive positions and hedging against downside risks. Caladan’s Derek Lim noted that with large exchange-traded fund outflows and sentiment in fear territory, market participants are particularly cautious. This defensive posture is further evidenced by long-dated skew, which measures the difference in implied volatility across different strike prices for options with the same expiration date, trending lower and hitting a 12-month low.

Sean Dawson, head of research at on-chain options exchange Derive, highlighted in a tweet that the declining long-dated skew suggests investors are paying a premium for downside protection. This technical indicator reinforces the cautious market sentiment, with Bitcoin down 2.5% on the day to $107,000 after climbing to an intraday peak of $111,550, according to CoinGecko data. As markets navigate the first wave of post-shutdown economic clarity, Bitcoin’s ability to withstand potential volatility will test its recent stabilization.