Bitcoin Traders Shrug Off Expected 3.4% Inflation Spike

Bitcoin traders are pricing in a 2.5% price swing in either direction on the back of upcoming U.S. inflation data. This expectation is reflected in options and derivatives pricing. The 30-day implied volatility, represented by the BVIV index, has dropped to 46.5%, the lowest since Jan. 31. This translates to an expected daily move of about 2.9%, which is 0.5% below the 30-day average of 3.4%.

The rest of the market is awaiting the March inflation report due Friday at 8:30 ET. The report is expected to show that the cost of living rose 3.4% year-on-year in March, a sharp increase from February's 2.4% reading. The core figure is forecast to have increased by 2.7% following March's 2.5% rise. This expected upswing is largely due to fuel and energy price spikes triggered by the Iran war. Interest rate markets have already dialed back expectations for Fed rate cuts this year due to these inflation risks.

Analysts believe the data will determine whether the Fed maintains a no-cuts regime after the oil shock. The bitcoin market is currently pricing in a move that is well within its recent average volatility.