Bitcoin hovered near $80,000 just hours after the release of US inflation data for August. A Consumer Price Index (CPI) report that aligned with market consensus triggered a swift price rebound, brushing off tensions in the bond market as yields briefly touched 22-year highs.
August CPI data showed inflation at 3.4% year-over-year (YoY) and 0.4% month-over-month (MoM). These headline figures came in exactly in line with market expectations. Meanwhile, annual core CPI edged down slightly from 2.5% to 2.4%, marking its lowest level since 2021. Monthly core inflation came in at 0.3%, hotter than the expected 0.2%.
Bitcoin’s price briefly dropped to $76,000 shortly after the report was released. However, that selling pressure was swiftly absorbed by the market, and Bitcoin surged to nearly $79,000 in short order, posting a total gain of 3% over the last 24 hours.
The Bitcoin rally pushed total crypto market capitalization back toward the $2.7 trillion mark. Ethereum led major altcoins with a 7.48% gain to $2,611. Solana followed with a 4.53% increase, reclaiming ground above $100. Elsewhere, Zcash posted a 23.09% surge over the past week.
US stock markets mirrored the positive momentum. The S&P 500 rose 1% and the Nasdaq added 1.1%, after both had initially weakened early in the trading session.
Record Bond Yields and the Weight of Oil Prices
In contrast to the response in crypto and equity markets, the bond market showed palpable tension. The 30-year Treasury yield surged to its highest level since June 2004 before retreating to close at 5.309%. The Kobeissi Letter, a macroeconomic commentary platform on X, summed up the market conditions in a concise sentence: “This is a nervous market.”
Market unease stems from energy price pressures weighing on the economy. West Texas Intermediate (WTI) crude oil remained stuck around $100 per barrel, driven by the fallout of the US-Iran war and global supply constraints.
The energy burden was evident in the August CPI breakdown. The energy sector jumped 16.3% YoY, propelled by a 27.4% rise in gasoline and a 52% surge in fuel oil. On a monthly basis, a 3.9% increase in gasoline accounted for more than a third of the total CPI surge. Meanwhile, monthly core inflation was driven by airfares rising 2.7%, lodging by 2.4%, and communications by 2.3%. Food prices also posted a 2.7% YoY inflation rate.
Signals for the Next Interest Rate Hike
The inflation print immediately shifted market expectations around the Federal Reserve’s next move. Odds of a 25 basis point interest rate hike at the September 15-16 Federal Open Market Committee meeting dominated across various platforms.
CME FedWatch placed the probability of a rate hike in the 69% to 85% range. Prediction market Polymarket showed a 62% chance, aligning with Myriad’s 61% pricing.
Signals of further monetary tightening have already emerged from within the Fed itself. At the July meeting, three regional Fed presidents dissented in favor of rate hikes. A similar message came from Fed Chair Kevin Warsh during his speech at Jackson Hole, reiterating that the central bank still has “work to do” on inflation.
For crypto investors, macroeconomic conditions confirm that the era of high interest rates is far from over. Yet Bitcoin’s rapid bounce from the $76,000 zone demonstrates resilient dip-buying demand, even under the looming shadow of tighter policy next week.
Reported via Cointelegraph.
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Previously: Bitcoin Touches $79,837 and Nearly Prints Golden Cross - But US Inflation Data Derails It
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
