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May CPI report could become the biggest market-moving event of this week.
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Economists expect inflation to rise above 4.2% for first time recently.
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Meanwhile, bitcoin risks testing $54,000 support if inflation exceeds market expectations again.
Today, the entire crypto market is on edge as the U.S. Consumer Price Index (CPI) report is set to be released at 8:30 AM ET. Economists expect annual inflation to climb to 4.2%, its highest level since March 2023.
With Bitcoin already struggling near $61,000, stronger-than-expected economic data could put more pressure on the price and trigger another sell-off.
U.S CPI Report To Come At 4.2%
On 10 June, the U.S. Bureau of Labor Statistics (BLS) will release the May CPI data. Economists expect May’s headline CPI to rise to 4.2% year-over-year, up from April’s already elevated 3.8% reading. If accurate, it would mark the first time since March 2023 that inflation has climbed above 4%.
Even Prediction markets are also leaning toward a hotter reading.
On Kalshi, 47% of traders expect inflation to hit 4.2%, while another 32% believe it could reach 4.3%. At the same time, 59% of traders predict core CPI will increase by 0.2% month-over-month, while 35% expect a 0.3% rise.
These estimates are well above the Federal Reserve’s long-term inflation target of 2%, suggesting inflation remains a major concern for policymakers.
What Happens if Inflation Comes in Hotter Than Expected?
In April, inflation came in hotter than expected at 3.8%, raising concerns that the Federal Reserve would keep interest rates higher for longer. Following the report, Bitcoin fell nearly 28%, dropping from $82,000 to around $60,000 within three weeks.
Inflation concerns have also been fueled by rising energy prices. Ongoing tensions in the Middle East have pushed oil prices higher, making it more expensive to transport goods and services.
Can Trump’s Iran Deal Comments Change the Outlook?
There is one factor that could help ease inflation fears in the coming months.
Coinpedia news reported that President Donald Trump recently said negotiations with Iran are in their “final throes” and that a deal could be signed within “two or three days.” If tensions ease and oil prices decline, inflation pressures could gradually cool.
That scenario would improve expectations for future liquidity conditions and support demand for risk assets, including cryptocurrencies.
Could Bitcoin Test $55K Next?
Bitcoin’s recent sell-off indicates changing macro expectations rather than problems specific to crypto.
If inflation comes hotter than expected again, Coinpedia analysts believe Bitcoin could face renewed selling pressure, with the September 2024 support zone near $54,598 emerging as a key level to watch.
However, a softer-than-expected CPI reading could revive hopes for Bitcoin recovery.
