Bitcoin is facing a critical test this week as investors await the U.S. inflation report for October, following a sharp sell-off in AI-related stocks. The consumer price index (CPI) data, due on November 10, will be closely watched to gauge whether inflation pressures are easing or persisting. This comes after a tumultuous week where the Nasdaq dropped 5.5%, the Nasdaq-100 fell 6.4%, and semiconductor stocks tumbled 12%, while Bitcoin declined just over 5%. More than $1 billion in leveraged crypto positions were liquidated during the sell-off, highlighting the interconnectedness of tech and crypto markets.
The inflation backdrop is already tense, with September's CPI report showing a 0.6% monthly increase and a 3.7% annual rise. Gasoline prices surged 9.1%, contributing significantly to the headline increase. Core CPI, which excludes food and energy, rose 0.3% month-on-month and 2.6% year-on-year. Investors will need to scrutinize the monthly core reading and the composition of inflation, as a slowdown driven by cheaper energy would send a different signal than a broader cooling in underlying prices.
The Federal Reserve has signaled caution, keeping its policy rate at 3.75%, 4% in October but with two officials favoring a quarter-point increase. The latest employment report showed payrolls increasing by 165,000 and unemployment at 4.1%, adding another layer of complexity for policymakers ahead of their December meeting. A stronger-than-expected inflation reading could reinforce expectations of tighter policy, potentially pressuring Bitcoin further. Conversely, a softer report could support a recovery in crypto and technology shares.
Adding to the mix, AI cloud provider CoreWeave is set to report its quarterly results on November 10, offering another window into AI infrastructure demand and financing needs. The timing of these events will be crucial, as last week's selling showed how quickly pressure in technology stocks can spill into crypto. Investors will be watching to see if Bitcoin can sustain any recovery post-CPI and whether the AI earnings news reinforces or challenges that move.