Trade of the Week: Cryptos to rise again this CPI week?

• Bitcoin back to within 2% of record high!
   
• All 11 FXTM Crypto CFDs climbing in tandem with Bitcoin
   
• So far in 2024, cryptos have climbed the same week that US inflation data is released
   
• Cryptos' year-to-date CPI week advance is tempered by 2 days of declines
   
• Solana offered "strongest hedge” against Gold on CPI days so far this year

 

Cryptos are skyrocketing today (Monday, April 8th)!

At the time of writing, Bitcoin is surging over 4% and sliced well beyond the $70k psychological level.

The "OG" crypto is now trading at its highest levels since mid-March when it posted a record high of $73,850.

Perhaps more importantly for bulls (those hoping that prices will go higher), Bitcoin appears to have conquered the stubborn $71,400 resistance region which had capped prices in late March.

 

Bitcoin's advance also lifted up many other cryptocurrencies.

Within the 11 different crypto CFDs offered by FXTM:

• At the time of writing, Ethereum is the best-performer so far today, surging over 6%
   
• Besides Bitcoin, there are also one-day gains of more than 4% so far for Litecoin, Chainlink, Cardano, Dogecoin, and Bitcoin Cash respectively
   
• Solana, Ripple, Avalanch, and Polygon are each rising over 2%

 

Potential breakout for Ripple and Litecoin?

Today’s surge is also translating into a couple of cryptos testing key resistance levels:

• Ripple is now testing its 50-day simple moving average (SMA)

 

 

• Litecoin is threatening to break above its upper downward trendline, which has supressed its prices since that April 1st intraday high.

 

The above-listed price movements come at the onset of a massive week for global financial markets.

The latest US CPI data is due this Wednesday, April 10th.

NOTE: CPI = consumer price index, is used to measure inflation

This monthly inflation data release out of the world's largest economy often causes trillions of dollars to move across global financial markets.

Traders and investors decipher what the latest CPI figures would mean for the Fed’s interest rates outlook – arguably still the primary focus of markets worldwide right now.

 

 

How do cryptos tend to behave around US CPI releases?

 

1) So far in 2024, cryptos have risen every week that the highly-anticipated US inflation data is released!

Here’s how cryptos have generally fared, as measured by the Bloomberg Galaxy Crypto Index, the same week as the US CPI announcement:

 

• Week ending March 15th = +0.9%
  (US CPI released on March 12th, 2024)

 

• Week ending February 16th = +9%
  (US CPI released on February 13th, 2024)

 

• Week ending January 12th = +5.6%
  (US CPI released on January 11th, 2024)

 

NOTE: The Bloomberg Galaxy Crypto Index measures the performance of some of the largest cryptocurrencies traded in USD, 8 of which are offered by FXTM as Crypto CFDs namely Bitcoin, Ethereum, Cardano, Solana, Avalanche, Polygon, Litecoin, and Chainlink.

These 8 cryptos account for 92.4% of the Bloomberg Galaxy Crypto Index.

 

If the upward momentum currently evident across the crypto complex can persist ...

that would only extend this trend of cryptos posting weekly advances when US inflation data is released.

 

 

 

2) Weekly advance, but with 2 days of declines

To be clear, it’s not a straight path upwards for cryptos towards a weekly advance. 

Each of those CPI weeks so far this year has seen 2 different days of declines for the Bloomberg Galaxy Crypto Index.

Such volatility ensures that crypto CFDs traders still have opportunities this week to potentially benefit from both rising and falling prices.

 

 

3) Solana has so far acted as "perfect" hedge against Gold

In trading, "hedging" means protecting against potential losses by making offsetting investments.

It's like buying insurance for your investments to minimize risks from price changes.

Also, we know that ...

Gold is a popularly-traded instrument on CPI release days.

The precious metal tends to post a larger-than-usual move on the days that the US consumer price index (CPI) is released.

Bullion has, on average, seen a $25 move between its highest prices and its lowest price on any given trading day so far in 2024.

This chart below shows the larger-than-average moves (white bars that extend above the red line) for gold on the 3 days that has seen CPI announcements so far this year.

 

 

However, the official CPI number can and do surprise markets, and may go against the trader’s position.

In order to potentially offset such losses,

Solana has been shown to offer a strong hedge against gold on CPI days.

 

Note how Solana has fared in comparison to Gold on US CPI release days so far this year:

 

• US CPI release on March 12th, 2024
  
  Gold = -1.12%
  
  Solana = +1.46%

 

• US CPI release on February 13th, 2024
  
  Gold = -1.33%
  
  Solana = +0.67%

 

• US CPI released on January 11th, 2024
  
  Gold = +0.22%
  
  Solana = -2.09%

 

In essence, Solana and Gold have moved in OPPOSITE directions on every single US CPI release days so far in 2024.

Of the 11 crypto CFDs offered by FXTM, this “inverse relationship” (when asset A goes up, asset B goes down, and vice versa) is strongest between Solana and Gold on US CPI announcement days.

This perhaps sets up Solana as a suitable “hedge” against Gold for this upcoming CPI release due Wednesday, April 10th, provided this “inverse relationship” holds strong once more this week.

 

 

Remember, past performance is not a guarantee of future results.

And trading is risky at all times!

Thus, it remains to be seen whether the 3 above-listed behaviours exhibited by Crypto CFDs will prove true once again this week.

Regardless, CPI announcements tend to inject massive bouts of volatility across global financial markets.

And that in turn may result in outsized trading opportunities in Crypto CFDs.

 

 

Cryptocurrency CPI inflation Volatility