Today's release of the core personal consumption expenditures price index (core PCE) data in the US has become the most critical headline that will determine the weekly direction of the crypto market. A higher-than-expected increase in the core PCE, the Fed's most important inflation indicator, could strengthen the case of members advocating for tight monetary policy and dampen risk appetite in the markets. Conversely, a softer data release could push bond yields lower, supporting a short-term recovery in Bitcoin and other major crypto assets.
All Eyes on the PCE
According to market forecasts, core PCE is expected to have increased by 2.9% year-over-year in September. This rate represents the 55th consecutive month above the Fed's 2% target. This persistent inflation outlook is reinforcing the "hawkish" wing of the committee's call for slower rate cuts. However, despite all the pressure, markets are almost certainly pricing in a 25 basis point Fed rate cut at the December 10th meeting.
On the volatility front, there's a surprising calm. According to Volmex data, Bitcoin's one-day implied volatility index (BVIV) is trading at around 36%. This rate suggests the price could move within a normal range of approximately 1.88% over the next 24 hours. In other words, markets are not significantly pricing in panic ahead of critical data.
Analysts attribute this to the expectation that the Fed will initiate a rate cut regardless of the data results. The CME FedWatch Tool also supports this; the possibility of a 25bp rate cut appears to be "completed" pricing.
The range observed on Bitcoin is also noteworthy. The price has been stuck between the $92,000 and $94,000 range for the past two days. According to Nexo analyst Iliya Kalchev, a softer PCE data could push the 10-year Treasury yield below 4%, potentially allowing BTC to attempt another break above $94,000. In the opposite scenario, where the data exceeds expectations, the market could return to a sideways-to-conservative mode until the Fed's meeting to clarify its roadmap. At the time of writing, the Bitcoin price is struggling to hold above $92,000.
ING analysts, however, warn that a potential interest rate cut may not be permanent. They believe any short-term pullbacks in interest rates could quickly reverse if the data flow doesn't signal a sustained easing.
Volatility is slightly higher on the altcoin front. Ether's one-day implied volatility has risen to 57.23%, indicating a price movement of approximately 3%. For Solana, this figure is 3.86%, and for XRP, it's 4.3%. This suggests that the PCE data could trigger broader price volatility in altcoins.
The crypto market's final trading day of the week is entirely focused on the outcome of this data. In addition to showing the Fed’s short-term policy, the PCE figure is seen as the key data that will determine the tight squeeze that Bitcoin is trying to break out of and the short-term price channels in altcoins.
