Bitcoin Faces Crucial Inflation Test After US Government Shutdown - Market Holds Breath
Bitcoin's resilience faces ultimate examination as inflation data emerges post-shutdown.
The Inflation Crucible
Digital gold meets traditional economic reality as the first inflation numbers since the government resumed operations hit the market. Bitcoin traders watch Treasury yields like hawks, knowing any surprise could trigger massive volatility.
Shutdown Aftermath
Delayed economic data finally surfaces, creating a perfect storm for crypto markets. The Federal Reserve's next move hangs in the balance while Bitcoin's inflation-hedge narrative gets its toughest test yet.
Traditional finance scrambles to adjust models while crypto natives shrug - because when central banks print, Bitcoin just sits there being digitally scarce. The ultimate 'told you so' moment awaits.
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.
