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The Hash Insider: US CPI spikes volatility in an otherwise uneventful week

The Hash Insider

The Nasdaq Crypto Index (NCI) closed Sunday (10/16/22) 2.5% below last week’s closing. The index’s neutral performance was influenced by ether (ETH), down 3.2%, while bitcoin (BTC) fell 1.9%.

Coming out of two consecutive weeks of stable prices, investors began the work week bracing for a US Consumer Price Index (CPI) report due to be released on Thursday.

Crypto asset prices remained mostly unchanged throughout the early week. Digital assets trended down in unison with traditional markets on low trading volume during Columbus Day and traded flat on Tuesday. The FOMC’s September meeting minutes were released on Wednesday, but brought no new details about the Fed’s hawkish outlook.

Despite the largely uneventful start to the week, the release of another CPI reading on Thursday managed to squeeze a week’s worth of volatility into a 12-hour period. 

The CPI report showed prices rose 0.4% in September (expected: 0.3%), taking headline inflation to 8.4% on a 12-month basis. Core inflation, a measure which excludes food and energy prices, rose 0.6% in September, taking the year-over-year measure to 6.6%, a 40-year high.

Core inflation results sent both crypto and equity markets on a roller coaster ride. BTC sank from around $19,000 to just under $18,200, while ETH dropped from $1,270 to just below $1,200 as trading volume swelled. 

Once crypto prices bottomed, they quickly shot back up following the lead of traditional markets. The S&P 500 registered its biggest intraday surge since January with a 194 point bounce to close 2.6% higher en route to breaking a six-day losing streak. 

Right around midday, BTC registered its weekly high of $19,872, a couple hours in advance of ETH’s weekly high of $1,336, both on unusually high volume. 

While analysts were unable to point out a clear driver that could explain the surprising bounceback from BTC’s four-month low, the likely culprit—for traditional and crypto markets alike—was the unwinding of short trades placed by investors expecting negative results.

In any case, September’s CPI report doesn’t seem to have affected investor’s medium- and long-term outlook for digital asset prices, as evidenced by Friday’s decline back to pre-CPI levels. 

From Friday night to Sunday afternoon, BTC prices drew a straight line across charts before registering a slight uptick to close the week at $19,138. ETH registered modest losses during the same period, before recovering in the week’s final hours to close out at $1,283. 


Looking Ahead


While traditional markets continue to monitor corporate results during earnings season, this week’s economic calendar will be headlined by the release of the Fed’s Beige Book (Wednesday) and US jobless claims (Thursday). Both could shed more light on the effects of the current rate hike cycle on the world’s largest economy. Neither is likely to alter November’s monetary policy decision, currently showing a 99.45% probability of a 75 bp hike, according to the CME’s Fedwatch tool.


Other News


Mastercard forms partnership to bring crypto to traditional banks


Mastercard has announced (10/17) it will be partnering with Paxos, a crypto infrastructure provider already used by PayPal, to help banks offer crypto trading. The payment processor will handle regulatory compliance and security, two obstacles banks often cite when explaining their hesitancy to offer crypto investments to their clients. Mastercard believes many investors are interested in crypto but are intimidated by the prospect of investing through crypto exchanges, citing a survey that showed that 60% of respondents would rather invest through their current financial institution. 


Google reveals plan to accept crypto payments for cloud services


Google announced (10/17) it will start accepting payments in crypto for its cloud services next year during its Google’s Cloud Next conference. Crypto payments will be made possible through a partnership with Coinbase. The tech giant hopes their latest crypto project will make “building faster and easier” for customers involved in the nascent Web3 industry.



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