Will the US December CPI release become a volatility amplifier for the crypto market?

【Crypto World】As the December US CPI data is about to be released (this Tuesday at 9:30 PM), the market is speculating whether there will be a rebound. To be honest, the main reason for this rebound is not that inflation has truly worsened again, but that the data deficiencies caused by the previous government shutdown are now being corrected.

Let’s first look at employment. After the November non-farm payroll data was released, the unemployment rate rose to 4.6% (more precisely 4.573%), hitting a four-year high. This sounds quite alarming, but the issue is that the aftermath of the government shutdown is still affecting data quality, and the market isn’t fully convinced by this number. Many had expected this to strengthen the case for the Federal Reserve to cut interest rates early, but it didn’t cause much of a stir.

From the perspective of interest rate futures pricing, the highest probability is that the January meeting will hold steady. The first rate cut could happen in March, April, or June, but the probabilities for these three timeframes are all below 50%, meaning the path forward is particularly uncertain.

The mainstream expectation for this CPI is: the overall annual rate will slightly rise from 3.0% to 3.1%, while the core annual rate remains at 3.0%.

How does this affect the crypto market? If the data meets expectations, it will likely have little short-term impact on risk assets. But if the core CPI jumps unexpectedly, concerns about sticky inflation will intensify, potentially suppressing risk appetite in the short term. The most ideal but less likely scenario is that CPI drops significantly while employment continues to weaken, which could reinforce expectations of easing and benefit risk assets, including cryptocurrencies.

Therefore, this data could become a short-term amplifier of market volatility, especially to watch out for extreme readings that could impact interest rate expectations and the entire asset pricing system.