Replays · US CPI · 12 May 2021, 13:30 UK
The inflation surprise that the crypto market barely noticed
The April 2021 inflation report was a shock to economists. Prices were 4.2% higher than a year earlier, and core prices jumped 0.9% in a single month. Bitcoin's reaction was modest. What happened in the week that followed was not, and almost none of it was about inflation.
A jump in four months
At the start of 2021, US inflation was running below 2%. By the April report it was 4.2%, the biggest annual rise since September 2008, according to the BLS. Part of that was the base effect of prices that had collapsed in spring 2020. The monthly figure was harder to explain away: core prices, which leave out food and energy, rose 0.9% in April alone, up from 0.3% in March.
The first four hours
- 1 15:20 UK: briefly above the release price
- 2 17:20 UK: low of the window, about 3.5% down
Bitcoin was at $56,678 at 13:30 UK. It was -1.3% after an hour, which is 2.8 times a normal hour and ranks #30 of 117 CPI releases in our data. That is a middling move for such a surprising number. Two hours in, it was briefly back above the release price. The slide only began in the late afternoon UK time, and Bitcoin was -2.8% at four hours.
US stocks were calm in the first hour too. The S&P 500 ETF was -0.17% after an hour and -0.9% at four hours.
The evening, and the week
| Market | 1h | 4h | 24h | 1w | × normal hour |
|---|---|---|---|---|---|
| Litecoin | −3.42% | −5.74% | −15.04% | −36.79% | 4.8× |
| Chainlink | −2.51% | −4.47% | −10.83% | −32.99% | 3.5× |
| XRP | −2.12% | −4.25% | −10.15% | −14.23% | 3.0× |
| Bitcoin | −1.30% | −2.76% | −11.31% | −32.54% | 2.8× |
| Ethereum | −1.19% | −3.85% | −11.10% | −38.72% | 2.0× |
Change from the 13:30 UK release, sorted by the first hour.
Later that day, Elon Musk said Tesla had suspended Bitcoin as a payment for its cars, citing the fossil fuels used in mining. That news came hours after the CPI window closed, and it explains much of the -11.3% one-day figure better than the inflation data does. A week later, Bitcoin was -32.5% below its release price, and Litecoin was -36.8%.
So this replay is a warning about the longer windows. The inflation report was historic, and the first hour was ordinary. The one-day and one-week columns record a crypto crash, but the timing points to other causes, starting with Tesla, rather than to the CPI.
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.