Busy week ahead for crypto market with increased volatility

Bitcoin hit a ten-month high ahead of the April 12 US inflation report, which could lead to a dovish stance from the Fed, but some macro investors see a rate hike ahead.
Busy week ahead for crypto market with increased volatility

Bitcoin Climbs to 10-Month High Ahead of US Inflation Report Release

Bitcoin reached a ten-month high of US$29,300 on April 10, ahead of the release of the US inflation (CPI) report on April 12. The report could show a decline in inflation, leading to a more dovish stance from the Federal Reserve (Fed), which in turn could prompt a Fed pivot. However, the US dollar index rose on April 10, along with a weaker stock market, suggesting that macro investors see a rate hike ahead. According to the CME Fed Watch Tool, there is a 70% probability that the Fed will raise rates by 25bps in May, due to a tightening labor market that may give the central bank a justification to continue raising lending rates in the future. The busy week ahead includes the release of important economic data, the Ethereum Shanghai upgrade, and fresh insights into the Federal Reserve policy, which could increase volatility in the market.

CPI Print and Q1 Bank Earnings Release: Potential Sources of Volatility

As the CPI print for March is due on April 12, the release date traditionally accompanies heightened volatility in risk assets, making it a key area to watch for “fakeouts” in crypto markets. Moreover, the release of Q1 bank earnings could also be a source of potential knee-jerk market reactions.

Ethereum Shanghai Upgrade: Impact on the Crypto Market

The launch of the Shanghai upgrade on April 12 marks the conclusion of Ethereum's two-year transition to proof of stake, bringing several technical improvements to the network. However, the most significant impact for Ethereum traders will be the unlocking of over 18 million ETH, worth roughly US$34bn, from staked positions. Despite concerns of a massive sell-off, some analysts predict that the price impact will be "a little bit more muted" than expected due to the anticipated length of the withdrawal queue. In the short-term, unstaking is not likely to cause a sharp, sudden dip in price. Moreover, the availability of liquid staking services means traders have been able to trade staked ETH before Shanghai, reducing the significance of the event's impact on the economics of Ethereum. While the short-term price action may be lackluster, the Shanghai upgrade is expected to boost the business use-case for crypto custody, leading to more locked up ETH and a bullish long-term outlook, according to Andrew Thurman, a data analyst at Nansen.

Market Outlook: Volatility Ahead

Overall, we expect the crypto market to experience some turbulence in the coming week, with traders and investors keeping a close eye on economic data, policy updates, and market movements. While Bitcoin’s recent performance has been impressive, it remains to be seen whether it can maintain its momentum and continue to climb higher, in our view.


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