Replays · US CPI · 11 May 2022, 13:30 UK
Inflation data meets a stablecoin collapse
On 11 May 2022 the crypto market was already in a panic. TerraUSD, an algorithmic stablecoin meant to hold at one dollar, had broken its peg in the days before, and its sister token LUNA was heading towards zero. Into that market came an inflation report that was hotter than people hoped. The result was one of the three biggest first-hour Bitcoin moves after any CPI release in our data.
- Headline CPI
- +0.3% m/m, 8.3% y/y
- March, for comparison
- +1.2% m/m, 8.5% y/y
- Core CPI
- +0.6% m/m, 6.2% y/y
- Bitcoin at 13:30 UK
- $31,537
- Low
- about $29,011 at 13:50 UK
- First hour
- -5.4%, 11.6× a normal hour, #3 of 117
A smaller headline, a bigger core
The annual inflation rate eased from 8.5% to 8.3%, the first decline in months. That was the good news. The bad news was in the detail: core prices, which exclude food and energy, rose 0.6% in April, double March's 0.3%. That suggested inflation was spreading beyond fuel, which meant the Fed would keep raising rates aggressively.
Every coin, the same cliff
- 1 13:50 UK: the low for Bitcoin, about 8% below the release price
- 2 15:00 UK: most of the drop has been recovered
Selling started on the first candle. Bitcoin lost 3.0% in five minutes and touched about $29,011 twenty minutes after the release, 8% lower. Smaller coins fell further. XRP was down 15.5% after half an hour and Cardano 13.9%.
US stocks went the other way. The S&P 500 ETF rose after the 14:30 UK open and was +1.1% an hour after the release. Crypto recovered too: by 15:00 UK, ninety minutes after the release, Bitcoin was back within 1% of where it started. For a while it looked as if the CPI sell-off had been an overreaction.
Then the rest of the day
| Market | 1h | 4h | 24h | 1w | × normal hour |
|---|---|---|---|---|---|
| Bitcoin | −5.39% | −3.07% | −11.81% | −5.34% | 11.6× |
| Ethereum | −6.82% | −7.15% | −20.51% | −15.71% | 11.6× |
| XRP | −12.90% | −12.25% | −26.50% | −14.43% | 18.3× |
| Cardano | −8.14% | −10.90% | −29.38% | −12.96% | 14.7× |
| Chainlink | −5.34% | −9.10% | −25.85% | −10.19% | 7.5× |
| Litecoin | −5.95% | −8.19% | −24.05% | −9.21% | 8.4× |
| S&P 500 ETF (SPY) | +1.15% | −0.62% | – | – | – |
| Nasdaq-100 ETF (QQQ) | +1.21% | −1.25% | – | – | – |
Change from the 13:30 UK release. The 24-hour column covers the worst day of the Terra collapse.
The recovery didn't last. Overnight, Terra's attempts to defend the peg failed and LUNA lost almost all its remaining value. Bitcoin finished the 24-hour window 11.8% below the release price, and Cardano lost 29%. Tether, the largest stablecoin, briefly traded below a dollar the next morning.
So how much of this was the CPI report? The first few minutes, probably most of them: the selling began on the release candle and was much sharper than the hours before it. The next day, almost none. It is a good example of why we show 24-hour and one-week columns next to the first hour. A big macro reaction can be overtaken by a crypto-specific crisis within the same session.
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.