CPI Data Today: Analyzing Bitcoin’s Response to Inflation Surprises

Key Takeaways

• The US CPI data came the same as expected on May 15 2024.
• Bitcoin’s price is in the process of creating a bullish candlestick.
• Is there a relation between CPI data and the BTC price movement?

On May 15 2024, the United States Consumer Price Index (CPI) data came out at 3.4%, meeting expectations. This marked a significant decrease from April 2023, when expectations were at 5.2% and the actual data came at 5.0%.

With this in mind, we take a look at the Bitcoin (BTC) price movement each month when CPI data comes out, determining how it reacts when the data comes higher, lower and the same as expected.

How is CPI Data Calculated?

The CPI measures the change in price of a basket of consumer goods  and services. It is one of the principal methods used to track purchasing power and inflation. The basket’s cost is divided by the cost of the same basket in the previous year and multiplied by 100 to give a percentage.

Besides measuring purchasing power  and inflation, CPI data serves to guide economic policy. More specifically, it helps determine whether to raise or lowering interest rates, government benefits such as social security payments and average salaries.

However, its limitations include that fact that is mostly measures inflation in urban populations, failing to include rural areas or various subgroups that do not live in urban areas.

Additionally, it can fall prey to substitution bias, since it does not account for changes in consumption patterns due to price changes.

How Has Bitcoin Reacted to CPI Data?

The CPI data since April 2023 is presented below, with the first figure representing the actual inflation and the second one the expected inflation.

• April 2023 – 5.0%/5.2%
• May 2023 – 4.9%/5.0%
• June 2023 – 4.0%/4.1%
• July 2023 – 3.0%/3.1%
• August 2023 – 3.2%/3.3%
• September 2023 – 3.7%/3.6%
• October 2023 – 3.7%/3.6%
• November 2023 – 3.2%/3.3%
• December 2023 – 3.1%/3.1%
• January 2024 – 3.4%/3.2%
• February 2024 – 3.1%/2.9%
• March 2024 – 3.2%/3.1%
• April 2024 – 3.5%/3.4%
• May 2024 – 3.4%/3.4%

So, inflation data has come as expected once, higher than expected six times and lower than expected six times. In the chart below, inflation coming higher than expected is represented by a green icon, lower than expected by a red one and the same as expected by a white icon.

Interestingly, there has never been a significant BTC price reaction the day the CPI data came out. Rather, BTC either created a small candlestick, or one with long wicks on each side. Therefore, while the CPI data caused short-term volatility, it did not cause a significant price movement.

When inflation came higher than expected, BTC created small bearish candlesticks four times, and a bullish one twice. The BTC price created a small bullish candlestick when CPI data came the same as expected but is creating a bullish one today. Additionally, it fell each time the data came lower than expected, but never by a significant margin.

So, the data show the BTC price has created bearish candlesticks 10 out of the 13 times CPI data came in the past 12 months. It is in the process of creating a bullish candlestick today. Nevertheless, the movement was never significant.

No Discernible Effect on the Long-Term Trend

To conclude, the BTC price has ordinarily fallen the day the CPI data came out. However, the reaction was never severe, and did not have any implications for the long-term trend. The trend could break today (May 15 2024) unless the BTC price suffers a sharp downturn and closes below $61,577.

About the Author

Valdrin Tahiri

Valdrin discovered cryptocurrencies while getting his MSc in Financial Markets from the Barcelona School of Economics in 2017. He has been an avid investor and trader since. Valdrin has written for several cryptocurrency media companies such as BeInCrypto and CoinGape.

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