IPC: Why does this indicator make people in the crypto world nervous?

Recently, people in the crypto world have been paying attention to a data point - IPC (Consumer Price Index). It sounds boring, but this thing directly affects your asset allocation. Today, let's break it down.

What is IPC? In simple terms

The IPC is an indicator that tracks changes in the cost of living. Every month, government departments collect price changes for daily expenses such as food, rent, fuel prices, and medical costs, creating a basket to calculate the average increase. If the IPC shows an increase of 5%, it means your overall cost of living has become 5% more expensive—your money hasn't increased, but life has become harder.

How is it calculated?

The process is very simple:

• Step 1: Choose a basket of representative goods (things you would actually buy in your real life)
• Step 2: Collect prices regularly every month, covering different regions.
• Step 3: Assign weights to different items (for example, rent accounts for 40% of the weight, while entertainment only accounts for 5%)
• Step Four: Compare with the base period (usually set at 100) to calculate the change magnitude.

For example: IPC changed from 100 to 107, which is an increase of 7%.

The Impact of IPC on the Economy

Don't underestimate this number; it affects the entire economic system.

1. Consumer Behavior — High IPC means that things are more expensive, and the common people will spend less money, which may lead to a decline in corporate sales.

2. Interest Rate Decision — Central banks are most afraid of high IPC. Once IPC surges, central banks typically raise interest rates, making traditional investments more attractive, while risk assets (such as cryptocurrencies) may be neglected.

3. Wage Adjustment — Unions and employers negotiate salaries using IPC data to ensure purchasing power is not eroded.

4. Policy Adjustment — Welfare, tax tiers, etc. will be automatically adjusted based on IPC.

The most concerning issue in the crypto world: How does IPC affect the crypto market?

This is the key point. The relationship between IPC and coin price has three lines:

Key Point 1: Inflation Hedge — When the CPI remains high for a long time, investors worry about the depreciation of fiat currency. Some institutions and professional investors begin to allocate Bitcoin as a hedge, reasoning that its total supply is fixed and its anti-inflation properties are stronger than those of the US dollar.

Key Point 2: Interest Rate Reaction — This is the most direct. High IPC → Central bank raises interest rates → Traditional bond/deposit yields rise → Funds flow out of risk assets → Coin prices come under pressure. The reverse is also true: Low IPC data → Central bank may lower interest rates → Risk appetite increases → Activity in the crypto world rises. Historical data shows that the Fed's interest rate cut cycles are often periods of coin price rebounds.

Key Point 3: Long-term Trend — If the IPC remains high and shakes people's confidence in fiat currency, it will accelerate the adoption of cryptocurrencies. However, this transition typically takes months or even years.

Practical Suggestions

If you are a crypto investor, pay special attention to the IPC data before and after its release:

• IPC lower than expected → may be positive for coin price (interest rate cut expectations rising)
• IPC higher than expected → may be bearish for coin prices (increased likelihood of interest rate hikes)
• The release date of IP data is often the period of highest volatility.

In simple terms, IPC is a barometer of central bank policies, and central bank policies directly affect the risk appetite of funds. As a person in the crypto world, paying attention to IPC is equivalent to gaining an early insight into the possible direction of the market.