US CPI Data Release Could Send Bitcoin Price Below $60,000

The US consumer price index (CPI) is set to be released later today, and market participants are eagerly awaiting the data. The CPI measures the cost of living in the world's largest economy and is expected to show inflation at a three-year high, with a year-on-year reading of 4.2%. This would put inflation more than two full percentage points above the Federal Reserve's (Fed) 2% target.

Concerns about interest rate hikes are already weighing on Bitcoin's price, and more evidence of rising inflation could send the largest cryptocurrency even lower. However, the key question is whether inflation has broadened across multiple categories or remained concentrated in energy.

If the latter is the case, markets may dismiss the print as a transitory effect of the first-quarter spike in oil prices driven by the war with Iran. The CBOE Oil Volatility Index (OVX) has already cooled to pre-war levels, and WTI crude fell over 16% to $87 a barrel last month.

Bitcoin's reaction will depend less on the headline figure and more on what's underneath it. A hotter-than-forecast figure across several sectors raises the probability of a break below $60,000 in Bitcoin's price. On the other hand, a downside surprise could trigger a relief rally, especially given BTC is looking oversold on key indicators.