On Friday, Bitcoin (BTC) climbed back to $79,000 following the release of US inflation metrics that generally aligned with expectations.
Key points:
- US core CPI inflation increased by 0.3% month-over-month, beating predictions of 0.2%.
- The estimated chance of a Federal Reserve interest-rate hike at the September 16 gathering climbed to 85%.
- QCP analysis cautions that surging US bond yields will create headwinds for Bitcoin during this period of Fed tightening.
Bitcoin Surges 3% While “Nervous” Markets Process CPI Figures
TradingView data displayed renewed price fluctuations for BTC following the publication of the August Consumer Price Index (CPI), which registered at 3.4% year-on-year.
BTC/USD one-hour chart. Source: Cointelegraph/TradingView
After an initial dip to $76,000, the BTC/USD pair mounted a swift recovery, posting gains of more than 3% over the course of the day.
This upward momentum mirrored traditional US equities, which also bounced back into positive territory after a sluggish beginning to the trading day. The reaction was sparked when the CPI matched projections, coming just one day after the Producer Price Index (PPI) had exceeded forecasts. At the time of writing, the S&P 500 had advanced 1%, while the technology-focused Nasdaq Composite Index was up 1.1%.
S&P 500 one-hour chart. Source: Cointelegraph/TradingView
American bond yields likewise experienced sudden instability. Prompted by the CPI announcement, the 30-year yield fluctuated wildly, initially touching its highest point since June 2004 before retreating to 5.309%.
“This is a nervous market,” market commentary provider The Kobeissi Letter summarized via a post on X.
US 30-year bond yield one-hour chart. Source: Cointelegraph/TradingView
With WTI crude oil hovering near $100 per barrel, the repercussions of the expanding US-Iran conflict and the related tightening of oil supplies were clearly visible within the inflation statistics.
“The gasoline index climbed 3.9 percent during August, representing over a third of the overall monthly rise across all items. The energy index advanced 2.1 percent over the month,” an official news bulletin from the Bureau of Labor Statistics (BLS) verified.
The report also noted that core CPI grew by 0.3% over August, exceeding predictions by 0.1%.
US CPI 12-month % change. Source: BLS
In reaction, market participants increased their wagers that the Federal Reserve will implement a 0.25% interest rate hike during its September 16 gathering. The most recent figures from CME Group’s FedWatch Tool revealed that the probability of this scenario climbed to 85% on Friday, up from 60% the prior week.
Fed target-rate probability comparison for September FOMC meeting (screenshot). Source: CME Group
Fed policymakers are reportedly divided on the proper direction for monetary policy, with governor Christopher Waller mentioning last week that he would lean toward keeping rates steady within their current 3.50-3.75% corridor if inflation indicators display at least “some evidence of disinflation.”
“What is the price of holding off for one meeting? Raising rates by 25 basis points for one single meeting right now is not going to push the CPI down to 2%,” he stated to Reuters.
Analysis: Yield Expansion Set to Act as Bitcoin Obstacle
Addressing the potential consequences of elevated bond yields going forward, trading firm QCP Capital cautioned that crypto bulls had little positive news to anticipate. This comes even though the BTC/USD pair rallied 25% in August following the US Treasury’s announcement that it would expand debt buyback programs.
Related: Bitcoin buyers wary of July sub-$58K floor amid onchain data ‘anomaly’
“The climb in American yields throughout this year has been propelled principally by stricter monetary expectations and a risk premium affecting both equities and fixed income, rather than by economic expansion,” the firm noted in its recent commentary.
“This represents the most unfavorable environment for Bitcoin: a competing 5% risk-free yield unaccompanied by the nominal economic growth that usually accompanies higher yields. It directly undermines the narrative that propelled Bitcoin from $63,000 to $82,000 in the latter half of August, which relied on the concept that Treasury liquidity interventions would supply foundational support.”
QCP suggested that Bitcoin will ultimately draw advantages from these trends, though only after buyback initiatives have had adequate time to pump necessary liquidity into the financial system.
This article is produced in accordance with Cointelegraph’s Editorial Policy and is intended for informational purposes only. It does not constitute investment advice or recommendations. All investments and trades carry risk; readers are encouraged to conduct independent research.
Originally published at https://cointelegraph.com/markets/bitcoin-spikes-toward-80k-as-us-cpi-data-delivers-new-22-year-high-in-bond-yields?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss_partner_inbound.
