"US September Non-Seasonally Adjusted CPI Year-on-Year", this is the core inflation indicator that the market is most concerned about. Below, I will explain this data in detail and analyze its potential impact on the encryption market.

Please note (previous value 2.90%, forecast value 3.10%) and the general market logic. Our analysis will focus on two scenarios: "above forecast" or "below forecast".

1. What is the "US September Non-Seasonally Adjusted CPI Year-on-Year Rate"?

- Basic Definition: CPI (Consumer Price Index) is an indicator that measures the changes in the price level of a basket of consumer goods and services. The "Non-Seasonally Adjusted CPI Year-on-Year" refers to the annual inflation rate calculated by comparing the price level in September of this year with that of September last year. It is the most direct indicator of inflation.
- Why the market is concerned: This data is a key indicator for assessing inflation pressure in the United States. The Federal Reserve's core mission is to maintain price stability (keeping inflation around 2%) and achieve full employment. Therefore, CPI data will directly impact the Federal Reserve's monetary policy decisions, particularly regarding interest rate hikes, cuts, or maintaining rates.

2. How data affects the financial market (transmission path)

To understand the impact on the encryption market, it is essential to first comprehend its transmission mechanism. The entire chain can be summarized as:

CPI data → Federal Reserve monetary policy expectations → US dollar and US treasury yield → Global capital flow → encryption market

1. Starting point: The CPI data itself
- Data above expectations (e.g., published value ≥ 3.2%): Indicates that inflation is more stubborn and strong than economists and the market anticipated. This means that the U.S. economy may be "overheating," price pressures persist, and the Federal Reserve's work to curb inflation is not yet complete.
- Data meets or is below expectations (e.g., published value ≤ 3.0%): indicates that inflationary pressures are easing, or the pace of easing is faster than expected. This will give the Federal Reserve more patience, avoiding the need to rush into more stringent tightening measures.
2. Core aspects: Expectations regarding the Federal Reserve's policy
- The Federal Reserve regulates the economy by adjusting interest rates and the balance sheet (QT, quantitative tightening).
- If CPI is higher than expected: the market will anticipate the Federal Reserve:
- Maintain high interest rates for a longer period.
- Possible rate hike again.
- Continue or accelerate the reduction of the balance sheet (QT).
- If the CPI is lower than expected: the market will expect the Federal Reserve:
- The interest rate hike cycle is about to end.
- Possible to bring forward interest rate cuts on the agenda.
- May slow down or stop the tapering earlier.
3. Impact on Traditional Assets (US Dollar, US Treasuries)
- CPI higher than expected: The expectation of interest rate hikes will push up the yield on U.S. Treasuries (as bond prices fall), attracting global capital into U.S. dollar assets in pursuit of risk-free high returns. This will lead to a stronger dollar.
- CPI lower than expected: The expectation of interest rate cuts will lower government bond yields, weaken the attractiveness of the dollar, and lead to a weaker dollar.

3. Detailed Impact Analysis on the Encryption Market

Cryptocurrency, especially Bitcoin, is currently seen by many investors as a "risk asset" or "alternative asset." Its price is profoundly influenced by global liquidity (USD liquidity) and risk appetite.

Scenario 1: CPI data is higher than the forecast (for example, published value ≥ 3.2%) — Negative for the encryption market

- Logical chain: High inflation → Federal Reserve maintains tightening expectations → Strengthening of the dollar, rising financing costs → Global liquidity tightening, risk assets under pressure.
- The specific impact on the encryption market:
1. Outflow pressure on funds: The high interest rate environment makes holding risk-free or low-risk dollar assets (such as U.S. Treasury bonds) more attractive. Investors may sell high-risk, high-volatility Bitcoin and encryption currencies, transferring funds into safer dollar cash or Treasury bonds. This is known as "capital outflow from the crypto market."
2. Increased financing costs: High interest rates mean that the cost for investors to borrow money to invest in encryption currencies increases, which will suppress leveraged trading and speculative behavior, reducing the active funds in the market.
3. Decrease in risk appetite: Market sentiment tends to shift towards "safe haven". As a representative of high risk, encryption currencies often face significant sell-offs. The decline in the stock market (especially tech stocks) may also drag down the crypto market.
4. Pressure from a Strong Dollar: Cryptocurrency prices are often quoted in US dollars. A stronger dollar means that more of other currencies (such as euros and yen) are needed to purchase an equivalent amount of cryptocurrency, which may dampen investment demand in non-US regions.

Scenario 2: CPI data is lower than the forecast (e.g., published value ≤ 3.0%) — favorable for the encryption market

- Logical chain: Inflation relief → Federal Reserve slows down tightening / expectations of shifting to easing increase → US dollar weakens, financing costs decrease → Global liquidity expectations improve, risk assets benefit.
- The specific impact on the encryption market:
1. Capital inflow motivation: The market expects the Federal Reserve to "loosen monetary policy," which may lead to increased liquidity. Investors are more willing to allocate funds to assets like Bitcoin, which offer potentially higher returns, in search of appreciation in a low-interest-rate environment. This is what is meant by "capital inflow into the encryption market."
2. Increased Risk Appetite: Market sentiment will shift towards "risk-taking". Cryptocurrency, as an asset class with high growth potential, will attract a large amount of speculative and investment capital.
3. Strengthening of Bitcoin's "digital gold" attributes: If inflation continues to cool down but signs of an economic recession appear, the market will anticipate that the Federal Reserve will significantly lower interest rates to save the economy. This "loose monetary" environment is very favorable for assets with a limited supply like Bitcoin, as it is seen as a hedge against currency devaluation.

Summary and Reminder

Data results on Federal Reserve policy expectations, USD/Treasury bonds impact on the encryption market, core logic.
Higher than expected (e.g., 3.2%) Hawkish (tightening monetary policy) Stronger dollar, rising yields Significant bearish tightening liquidity, declining risk appetite, capital outflow
In line with predictions (such as 3.1%) Neutral (holding steady) Narrow fluctuations Neutral/small fluctuations The market has digested this expectation, focusing on subsequent guidance.
Below forecast (e.g., 3.0%) Dovish (easing monetary policy) Weakening dollar, declining yields Significantly positive Liquidity improvement, rising risk appetite, capital inflow

Important tips:

1. "Buy expectations, sell facts": The market will trade based on predictions before the announcement. Sometimes even if the data is good, if it does not meet the market's most optimistic expectations, the price may still drop. The key lies in the degree of deviation between the data and the market's general expectations.
2. Pay attention to core CPI: In addition to the overall CPI, the core CPI (excluding food and energy) better reflects persistent inflation trends, and the Federal Reserve also attaches great importance to it. "Core CPI MoM" is an important indicator.
3. Market sentiment is an amplifier: CPI data can affect market sentiment, leading to price overshooting (excessive rise or fall). Therefore, the moment the data is released is usually accompanied by extremely high volatility.

The value will be announced at Beijing time utc+20:30.

#CPI数据来袭 #十月降息预测