Bitcoin Surges to $79,000 Following US Inflation Data Release

Bitcoin ($BTC) climbed back to $79,000 on Friday, influenced by US inflation figures that largely met market expectations.

Key Highlights:

• The US core Consumer Price Index (CPI) recorded a 0.3% increase month-on-month, surpassing forecasts of 0.2%.
• Expectations for a Federal Reserve interest rate hike at the upcoming meeting on September 16 have surged to 85%.
• An analysis by QCP warns that rising US bond yields may adversely affect Bitcoin, amid tighter Fed policies.

Bitcoin experienced a 3% uptick as an anxious market processed the latest CPI data. According to TradingView, the release of the August Consumer Price Index (CPI), which showed a year-over-year increase of 3.4%, resulted in renewed volatility for $BTC.

After a brief drop to $76,000, the price of $BTC/USD bounced back sharply, climbing over 3% within the day. This upward movement mirrored gains in US stock markets, which also turned positive after a slow start. The positive sentiment was attributed to CPI figures aligning with expectations, following an unexpected rise in the Producer Price Index (PPI) the day before. At the time of writing, the S&P 500 was up by 1%, while the Nasdaq Composite Index saw an increase of 1.1%.

TradingView’s charts indicated volatile behavior in US bond yields. The 30-year yield initially skyrocketed to its highest levels since June 2004 before retreating to 5.309%, following the CPI release. “This is a jittery market,” summarized The Kobeissi Letter on X.

Meanwhile, WTI crude oil prices hovered around $100 per barrel, with influences from the ongoing US-Iran conflict and its effect on oil supply evident in the CPI figures. A report from the Bureau of Labor Statistics (BLS) confirmed, “The gasoline index rose by 3.9% in August, contributing over a third of the overall monthly increase. The energy index rose by 2.1% for the month.”

The report also highlighted a 0.3% climb in core CPI for August, exceeding the expected figure by 0.1%.

In light of these figures, traders are increasingly betting on a 0.25% interest rate hike by the Federal Reserve during its September 16 meeting, with the likelihood of this outcome rising to 85% on Friday, up from 60% the previous week, as indicated by the CME Group’s FedWatch Tool.

Officials within the Fed are reportedly divided on the best course of action, with Governor Christopher Waller suggesting last week that he would prefer maintaining rates in the 3.50-3.75% range if inflation data indicates “some signs of disinflation.” He remarked to Reuters, “What’s the cost of waiting one meeting? A 25 basis point hike right now won’t be enough to bring the CPI down to 2%.”

Analysis: Bond Yield Increase Weighing on Bitcoin

In a recent statement, QCP Capital highlighted that rising bond yields could present challenges for Bitcoin bulls. Despite Bitcoin’s impressive 25% surge in August following announcements from the US Treasury regarding debt buyback initiatives, the outlook remains cautious.

According to QCP, “The increase in US yields this year is primarily driven by tighter policy expectations and a risk premium affecting both stocks and bonds, rather than growth factors.” They added, “This combination creates an unfavorable scenario for Bitcoin: a competing 5% risk-free rate without the growth that typically accompanies yield increases. This undercuts the narrative that propelled Bitcoin from $63,000 to $82,000 in late August, which relied on the notion of Treasury liquidity providing essential support.”

Ultimately, QCP posits that Bitcoin may experience benefits from these developments, but only after buyback operations have had sufficient time to inject liquidity into the markets.