Bitcoin Braces for First Inflation Test Since US Shutdown

Bitcoin and the broader financial markets are bracing for the first inflation data release after the U.S. government shut down on October 1, with analysts pricing in a measured market reaction. 

The Consumer Price Index reading, scheduled for release on Friday, will play a pivotal role in shaping the Federal Reserve’s interest rate decision next week.

The report arrives amid significant economic uncertainty, with officials and economists lacking recent data on the labor market due to the government shutdown.

“Bitcoin and the broader market are expected to respond moderately to this week’s key macro event,” Tim Sun, senior researcher at digital asset financial services company HashKey Group, told Decrypt. “Given slowing employment and moderating demand, even a mild upside surprise in CPI is unlikely to materially alter market expectations.”

If U.S. inflation meets expectations with minor deviations, “the most probable outcome is a muted reaction,” Derek Lim, head of research at crypto market-making firm Caladan, told Decrypt, echoing Sun’s outlook.

The consensus forecast anticipates headline inflation rising to 3.1% from 2.9%. However, data from Truflation, a crypto-based independent macroeconomic data provider, suggests a lower figure of 2.28%.

The most probable outcome is a “modest increase or flat reading,” which would align with a narrative of gradual inflation moderation, Sun noted, suggesting that the data itself is unlikely to cause significant disruption, as investor attention remains centered on ongoing tariff and trade policy uncertainty.

Spotlight on jobs data & tariffs, not inflation

The focus on employment data follows recent comments from Federal Reserve Chair Jerome Powell, who highlighted that the strong economic growth does not reflect a weakening labor market.

That concern has been amplified by the recent U.S.-China trade developments, where both nations have implemented reciprocal tariffs, creating additional uncertainty for global markets

“The impact would largely depend on the magnitude of the surprise,” Sun said, 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.”

While the inflation report is key from a policy standpoint, Sun suggests it may not be decisive on its own. “The Fed tends to focus on the cumulative direction of inflation rather than one data point,” he concluded.

The week ahead

With markets flying somewhat blind, Friday’s data will test whether stabilizing Bitcoin can weather the first wave of post-shutdown economic clarity.

The crypto market appears more vulnerable than traditional equities heading into the print, as 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 a stronger risk appetite for equities.

With large exchange-traded fund outflows and sentiment in the fear territory, Lim noted investors are defensive and hedging downside risks.

Meanwhile, long-dated skew, which is the difference in implied volatility across different strike prices for options with the same expiration date, is trending lower and hit a 12-month low, Sean Dawson, head of research at on-chain options exchange Derive, highlighted in a tweet, suggesting investors are paying a premium for downside protection.

Bitcoin is down 2.5% on the day to $107,000 after climbing to an intraday peak of $111,550, CoinGecko data shows.