Recaps · US CPI · 13 Dec 2022, 13:30 UK

Good news, priced faster

One month after the soft October inflation report sent Bitcoin up more than 6% in an hour, November's report was soft again. Bitcoin rose on the first candle, but by much less, and most of the gain was gone four hours later. It is a useful case of the same surprise landing twice.

Release: Tuesday 13 December 2022, 13:30 UK
Headline CPI: +0.1% m/m, 7.1% y/y (October: 7.7%)
Core CPI: +0.2% m/m, 6.0% y/y
Forecast: 7.3% y/y (FactSet, via CoinDesk)
Bitcoin at release: $17,617

The report

Consumer prices rose just 0.1% in November, below the 0.3% economists expected, according to CNBC. The annual rate fell to 7.1%, the smallest increase in nearly a year, Reuters wrote. Core prices rose 0.2%. The Fed was due to announce its next rate decision the following evening.

The crypto market had its own news that day. FTX founder Sam Bankman-Fried had been arrested in the Bahamas the night before, and a Bahamian judge denied him bail on the same Tuesday (AP, Reuters).

One candle, then a fade

1 13:30 UK: the release candle, high about +2.8%
2 15:30 UK: back under +1%

Bitcoin, 5-minute candles, % from the 13:30 UK price. Source: Bitstamp.

Bitcoin's whole move came in the first five minutes. The release candle reached about 2.8% up and closed +1.74%. The price held near there for an hour, +1.65% at 14:30 UK, which ranks #26 of 117 CPI releases at 3.1 times a normal hour. It then slipped to +0.62% by 17:30 UK.

Stocks did something similar on a larger scale. Reuters reported that the S&P 500 rose as much as 2.76% early in the session but closed only 0.73% higher. In our data the S&P 500 ETF was -2.0% at four hours from the 13:30 UK price, which was set before the open.

Same surprise, smaller move

The comparison with the month before is the useful part. After the October report on 10 November, Bitcoin rose 6.7% in an hour, 12.5 times a normal hour, and kept rising. In December a similar miss was worth a quarter of that. Once a market has seen inflation cool once, a second soft print confirms a view traders already hold, rather than changing it. The first surprise usually moves prices more than the second.

First-hour change after the release, in %. Source: Bitstamp.

Solana gained the most, +6.0% in the first hour and +7.8% after a day. The next evening the Fed raised rates by 50 basis points and its projections showed no cuts in 2023. Bitcoin fell 2.3% in the hour after that decision, and it was -4.6% a week after the CPI release.

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.