CryptoCPIWatch

Key Takeaways:February CPI inflation expected at 2.9% YoY, down from 3.0% in January.Core CPI forecasted at 3.2%, slightly easing from 3.3% previously.US Federal Reserve's rate-cut outlook may shift based on CPI data.Crypto markets, stocks, and US dollar fluctuations depend on inflation trends.US Inflation Data Expected to Show Cooling, But Risks RemainThe US Bureau of Labor Statistics (BLS) is set to release its February Consumer Price Index (CPI) report on Wednesday at 12:30 GMT, offering a critical insight into inflation trends. Market analysts anticipate a slight drop in inflation, which could influence Federal Reserve policy, the US dollar, and risk assets like cryptocurrencies.The headline CPI inflation rate is expected to come in at 2.9% year-over-year (YoY), down from 3.0% in January, marking the first dual decline in core and headline inflation since July 2024. The core CPI inflation rate, which excludes food and energy, is projected to fall to 3.2% from 3.3%.Monthly inflation projections:Headline CPI: +0.3% MoMCore CPI: +0.3% MoMAnalysts at TD Securities predict a broad-based deceleration in inflation, noting that housing costs and goods prices may decline, contributing to an easing trend.How the CPI Data Could Affect the Federal Reserve's Rate DecisionThe Federal Reserve has signaled caution on rate cuts, with Chair Jerome Powell stating last week that economic conditions remain "solid" but inflation must cool further before monetary easing is considered.Markets have already priced in 85 basis points (bps) of rate cuts in 2025, but persistent inflation could force the Fed to maintain a hawkish stance. On the flip side, a softer inflation print could solidify expectations of rate cuts starting in June or July.Impact scenarios:Lower-than-expected CPI (below 2.9%) → Fed rate cuts may be accelerated, USD weakens, risk assets rally (crypto, stocks).Higher-than-expected CPI (above 3.0%) → Fed maintains restrictive policy, USD strengthens, stocks and crypto decline.Trump’s Trade Policies Add Inflation UncertaintyWhile inflation may be cooling, President Donald Trump’s trade policies pose new risks. His administration has imposed tariffs on China, Canada, and Mexico, which could trigger higher import prices and supply chain disruptions, potentially reigniting inflationary pressures.Historically, the Federal Reserve has dismissed tariffs as one-off inflationary events, but if these policies escalate, inflation could remain stubbornly high, limiting the Fed’s ability to cut rates.Crypto Markets and the Inflation ReportCryptocurrency markets remain directionless ahead of the CPI update, with Bitcoin (BTC) trading around $82,185, down 25% from its peak, and Ethereum (ETH) at $1,889, marking a 16.2% weekly loss.Crypto investors are watching inflation data closely:Lower inflation → Bullish for Bitcoin and altcoins as Fed rate cuts become more likely.Higher inflation → Bearish for crypto as Fed remains restrictive, boosting the US dollar.Current crypto market sentiment:Bitcoin: +0.57% at $82,185Ethereum: -1.75% at $1,889XRP: +1.6%Dogecoin: +2.5%Solana, Cardano: Slight declinesMeanwhile, CoinShares' Digital Asset Fund Flows Weekly Report showed $876 million in outflows, marking the fourth consecutive week of digital asset investment outflows, further Market Volatility AheadThe US CPI report is set to be a major catalyst for the Federal Reserve’s policy outlook, the US dollar, and risk assets like crypto and stocks. While inflation is expected to cool, Trump’s trade policies, supply chain disruptions, and market uncertainty could keep the Fed cautious.Investors should brace for heightened volatility across all asset classes, with crypto markets especially sensitive to inflation surprises and Fed rate cut expectations.

A technical analysis pattern hinting at bull reversal has appeared on bitcoin's ($BTC ) daily price chart as market participants look to Wednesday's U.S. inflation data to put a floor under risk assets.

BTC has recently taken a beating, falling from $100,000 last month to under $80,000 this week due to several factors, including risk aversion on Wall Street, concerns about Trump's tariffs and U.S. recession fears. The disappointment over the lack of fresh BTC purchases under Trump's strategic reserve plan added to the downward momentum.

However, as prices fell to multi-month lows below $80,000 on Tuesday, the relative strength index (RSI)—a widely followed momentum oscillator—did not confirm this decline. The indicator produced a higher low, contradicting the lower low on the price chart, confirming what is known as the bullish RSI divergence.

It indicates that while the price is going down, the momentum behind the selling is weakening, potentially signaling an upcoming reversal to a bullish trend.
The pattern couldn't have come at a more interesting time than today, as the U.S. consumer price index for February, scheduled for release at 12:30 UTC, is expected to show progress. BTC's bullish divergence of the RSI means the stage is set for a positive response to a potential soft reading.

According to CNBC, the data is expected to show that the headline CPI and the core figure, which excludes food and energy, increased by 0.3% month-on-month in February. That implies an annualized reading of 2.9% for the headline CPI and 3.2% for the core, both 0.1 percentage point lower than in January.

"Tonight’s CPI print could set the tone for rate expectations, as markets now price in four Fed cuts this year, up from just one in January. Will inflation data validate this shift or bring fresh turbulence?," Singapore-based crypto trading firm QCP Capital said in a Telegram broadcast.
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