How Will Bitcoin (BTC) React To Sky-High Inflation Data?

Bitcoin (BTC) entered a holding pattern on Wednesday, ahead of data that is likely to show a massive spike in U.S. inflation.

BTC is hovering above $19,000- and is expected to hold around that level until the U.S. inflation reading. The Consumer Price Index (CPI) is expected to have risen by about 8.8% year-on-year in June– its fastest pace of growth in 40 years. The data is due at 8:30 AM ET.

Rising inflation is one of the key factors behind BTC’s astronomic crash in 2022, given that it has spurred interest rate hikes by the Federal Reserve.

A strong inflation  reading on Wednesday is likely to cause more Bitcoin losses. This could see the token sink to as low as $15,000.

Short positions on BTC grow ahead of CPI data

Data from Arcane Research shows that institutional investors are piling into short positions on BTC ahead of the inflation data. This is being done through buying into short-Bitcoin ETFs, such as BITI and BITO.

BTC has slumped 52% in the past three months, with a bulk of its losses being triggered just after a high inflation reading. June’s CPI reading of 8.6% had seen the token plummet below the $30,000 level, before it finally settled around 30% lower from there.

BTC’s reaction to data for June will also depend on the reading. A higher-than-expected reading is bound to take the token well below $20,000. But a more balanced reading may spur short-term gains.

Traders jittery over data

A fake inflation report on Tuesday had briefly caused broad-based losses in the crypto market, pulling BTC below $20,000. Given the sharp reaction to the report, it appears that traders are jittery over the coming inflation reading.

This in turn could also spur short-term volatility in the wake of the reading, causing brief but outsized moves in BTC prices.

But even if today’s inflation reading were to be favorable for markets, traders still have to contend with a slew of weak macroeconomic factors this year.