Bitcoin (BTC) returned to $79,000 on Friday after key US inflation data broadly matched expectations.
Key points:
- US core CPI inflation data rose 0.3% month-on-month, beating expectations of 0.2%.
- The implied probability of an interest rate hike by the Federal Reserve rose to 85% at its September 16 meeting.
- US bond yields will hurt bitcoin amid Fed policy tightening, QCP analysis warns.
Bitcoin jumps 3% as “nervous” market digests CPI numbers
Data from TradingView shows new BTC price volatility following the release of the Consumer Price Index (CPI) in August, which came in at 3.4% year-on-year.
BTC/USD hourly chart. Source: Cointelegraph/TradingView
After initially dropping to $76,000, BTC/USD quickly turned higher, gaining more than 3% on the day.
The move echoed US equities, which turned green after a weak start to the session. This was catalyzed by CPI is in line with expectations Just a day after the Producer Price Index (PPI) overshot. The S&P 500 was up 1% at the time of writing, while the tech-heavy Nasdaq Composite Index was up 1.1%.
S&P 500 Hourly Chart. Source: Cointelegraph/TradingView
US bond yields also saw snap volatility. On the back of the CPI print, the 30-year yield hit its first high since June 2004 before falling to 5.309%.
“It’s a nervous market,” trading resource Kobeisi Letter brief In response to X.
Hourly chart of US 30-year bond yields. Source: Cointelegraph/TradingView
As WTI crude continued to hover around $100 per barrel, the impact of the expansion of the US-Iran war and associated oil supply pressures was noticeable in the CPI number.
“The index for gasoline rose 3.9 percent in August, accounting for more than a third of the monthly all-items increase. The index for energy rose 2.1 percent in the month,” a Official press release Confirmed from the Bureau of Labor Statistics (BLS).
The release also reported that core CPI rose 0.3% in August, above expectations of 0.1%.
US CPI 12-month % change. Source: BLS
In response, traders doubled down on bets that the Federal Reserve will raise interest rates by 0.25% at its September 16 meeting. Latest information from CME Group FedWatch tool The probability of such an outcome rose to 85% on Friday, up from 60% a week ago.
Fed target-rate probability comparison for the September FOMC meeting (screenshot). Source: CME Group
Fed officials are known to be divided on the right direction for policy, with Governor Christopher Waller indicating last week that he would be willing to keep rates in their current 3.50-3.75% range as long as inflation data shows at least “some signs of disinflation.”
“What is the cost of waiting for a meeting? A 25 basis point hike, a meeting right now, is not going to bring the CPI down to 2%,” he said. to say Reuters.
Analysis: Yields rise to become Bitcoin headwind
Discussing the implications of higher bond yields going forward, trading company QCP Capital warned that bitcoin bulls have nothing to look forward to. This is despite BTC/USD gaining 25% in August after the US Treasury announcement Increase debt buyback interventions.
Related: Bitcoin buyers cautious amid July sub-$58K floor onchain data ‘inconsistencies’
“U.S. yield growth this year has been increasingly driven by tighter policy expectations and a risk premium in both stocks and bonds rather than growth,” it wrote in its latest analysis.
“This is the worst mix for bitcoin: a competing 5% risk-free rate without the nominal-growth trend that typically accompanies yield moves. This directly undercuts the narrative that drove bitcoin from $63,000 to $82,000 in the second half of August, leaning on a structural assumption.”
QCP argued that Bitcoin would eventually benefit from these developments, but only once buyback operations had time to inject sufficient liquidity into the market.
