Market bracing for 8.8% CPI release on Wednesday

June U.S. CPI numbers are released on Wednesday. The last release ignited the June sell-off in bitcoin, and the market expects a 40-year high YoY level of 8.8%. Will expectations be right this time?

Correlations between bitcoin and equities remain high as BTC’s 30-day correlation to Nasdaq and S&P 500 stays above 0.5. Following the crypto-specific sell-off related to UST’s collapse, correlations have declined from a peak above 0.8. In the period that followed, equities recovered, while bitcoin saw flat returns. However, as the inflation surprise of June 10th reached the market, correlations again grew, while bitcoin plunged and new collapses introduced new layers of unresolved contagion and uncertainty.

Sam Bankman-Fried of FTX noted last week that he thinks that the contagion situation is resolved. As crypto-specific market uncertainty gets resolved, traders should prepare for equity correlations to resume, and we note a slight growth in correlations last week. This week is an important macro week, with the June U.S. CPI release coming up on Wednesday.

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