Replays · US CPI · 13 Mar 2018, 12:30 UK

Down, up, and down again: a CPI hour in the 2018 bear market

In March 2018 Bitcoin was three months into its first big bear market, and the February inflation report produced the kind of hour that market loved: a sharp drop, a sharper recovery, and no lasting direction. The first hour ended 2.0% higher. By the following week Bitcoin was 5.7% lower and Ether had lost more than a fifth of its value.

Headline CPI: +0.2% m/m, 2.2% y/y
Previous month: +0.5% m/m, 2.1% y/y
Core CPI: +0.2% m/m, 1.8% y/y
Bitcoin at 12:30 UK: $9,033
First hour: +1.99%, 4.3× a normal hour
Rank: #13 of 117 CPI releases

A cooler print after a hot one

The January report a month earlier had shown prices up 0.5% in a single month, and it arrived in the same weeks as the February 2018 stock market sell-off. February's figures were calmer: 0.2% on both the headline and core measures, with the annual rate edging up to 2.2%. On paper that was mild relief for anyone worried about the Fed speeding up its hikes.

Fifteen minutes the wrong way

1 12:30 UK: the February CPI report
2 12:45 UK: the low of the session, about $8,830
3 13:30 UK: the high, about $9,266, as US stocks opened

Bitcoin, five-minute candles, 30 minutes before to 4 hours after the release. % from the 12:30 UK price of $9,033. Source: Bitstamp.

Crypto did not treat the calm number as good news, at least not at first. The first candles were flat, then the 12:45 bar dropped through $8,900 and touched about $8,830, 2.3% under the release price. Within half an hour that was gone. Buyers lifted Bitcoin back above the starting level, and by 13:30 UK, the US stock market open, it was trading near $9,266, roughly 4.8% above the low. That round trip is why the hour ranks so high against normal trading even though the net change was small.

Stocks were much quieter. The S&P 500 ETF was almost unchanged in its first hour and drifted lower through the afternoon, which suggests Bitcoin's swing had more to do with crypto's own positioning in a thin, nervous market than with the inflation data.

The week that followed

Change over the week after the release. Every crypto market we track was lower.

The next day Google said it would ban cryptocurrency advertising from June, and the market resumed its slide. The 24-hour column was already negative for every coin, and the one-week numbers were harsh: Bitcoin -5.7%, XRP -12.2% and Ether -22.8%. Against that backdrop, the CPI hour looks like noise inside a downtrend: a big intraday swing that told you a lot about volatility and very little about direction.

The first four hours after this release (amber) and after the hotter January report on 14 February 2018 (grey).

The comparison with February's release is useful. The hot January print produced a slow dip and a slow recovery, never more than about 1% either way in four hours. The cooler March print produced a far sharper swing that had faded by the four-hour mark. Neither month's reaction said much about where Bitcoin would be a week later.

All US CPI releases in our data, placed by Bitcoin's first-hour move against a normal hour.

Sources: release time and figures from the U.S. Bureau of Labor Statistics (public domain), first-print values via ALFRED, Federal Reserve Bank of St. Louis. Crypto: Bitstamp 5-minute candles; SPY/QQQ: IEX. No consensus forecasts are shown because they are proprietary; comparisons are with the previous release. “× normal hour” compares the first-hour move with the median move in matched quiet hours. How we measure it.