Bitcoin has successfully regained the $80,000 mark after momentarily dipping below it earlier on Thursday. This price movement coincided with new economic data from the US, revealing stronger than anticipated growth for the third quarter and ongoing inflation in September.
Summary
- The price of Bitcoin has surged back above $80,000 after briefly falling under that threshold earlier Thursday, as traders digested the latest US economic data.
- In the third quarter, the US economy expanded at an annualized rate of 3.4%, surpassing the projected 3.2%, while annual core PCE inflation hit 3.1% in September.
- This robust economic growth paired with ongoing inflation could lead the Federal Reserve to maintain higher interest rates, potentially impacting Bitcoin’s recovery.
- Bitcoin faces immediate resistance around $81,400 and then within the $82,000 to $82,500 zone, while $80,000 continues to be a crucial level for traders to monitor.
The US Bureau of Economic Analysis reported that the nation’s economy expanded at an annualized rate of 3.4% from July to September, surpassing economists’ expectations of 3.2% and showing an improvement from the previous quarter’s growth of 2.2%.
This data emerged just one day after the Federal Reserve chose to keep interest rates steady, generating renewed speculation about a possible rate hike before the year’s end.
Earlier in the session, Bitcoin (BTC) fell to around $79,800 before bouncing back above $80,000. However, it remained under pressure following Wednesday’s Fed announcement as traders scrutinized the potential impact of the new economic data on monetary policy.
US GDP shows faster growth amid persistent inflation
The advance GDP figures released Thursday indicated that the US economy gained momentum in the third quarter, primarily driven by consumer spending, business investments, and government expenditures.
Consumer spending, which makes up over two-thirds of US economic activity, experienced an annualized growth rate of 3.8%, maintaining its second-quarter pace.
Business investment contributed significantly, particularly as tech firms continued to invest in artificial intelligence infrastructure and equipment.
Nevertheless, this stronger economic performance came along with inflation data indicating that consumer prices continued to rise in September.
The Federal Reserve’s favored inflation index, the Personal Consumption Expenditures price index, increased by 0.5% month over month, in contrast to a 0.3% rise in August.
Annual headline PCE inflation reached 3.6%, up from 3.4% the prior month, while core PCE inflation, which excludes food and energy costs, remained at 3.1%.
The annual core figure matched the expectations of economists but was slightly higher than August’s 3.0%. On a monthly basis, core prices rose by 0.3%, aligning with predictions.
For the third quarter, the annualized core PCE price index stood at 2.5%, exceeding the anticipated 2.4%, although it decelerated from 3.3% in the previous period.
These figures indicated that inflation continues to be above the Federal Reserve’s 2% target, even as the economy shows signs of robust growth.
Implications of stronger US GDP for Bitcoin
The recent economic data coincided with investor concerns that interest rates might remain high for an extended period, negatively influencing Bitcoin.
Stronger economic growth typically allows the Federal Reserve to maintain tighter monetary policy, especially when inflation persistently exceeds its objectives.
Higher interest rates can increase the attractiveness of interest-generating assets, such as government bonds, compared to Bitcoin, which does not yield interest.
According to Reuters, economists now anticipate that the Fed might raise interest rates in December, following these latest economic indicators and persistent inflation levels.
On October 28, the central bank had already maintained its benchmark interest rate at 3.75% to 4.00% after a quarter-point rise in September.
This decision passed with a 10 to 2 majority, with Fed members Lisa Cook and Beth Hammack advocating for an additional 25 basis point increase.
Fed Chair Kevin Warsh acknowledged the strong pace of economic growth but emphasized ongoing inflation concerns.
For cryptocurrency traders, the potential for further rate increases may generate increased uncertainty, especially if forthcoming economic reports reveal ongoing inflation pressures.
Resistance ahead for Bitcoin’s price recovery
Bitcoin’s recovery above $80,000 followed a drop that briefly took it below this critical threshold.
As reported earlier, Bitcoin fell around 1.5% to $79,810.94 post-Fed interest rate decision, despite ongoing demand for US spot Bitcoin ETFs.
According to SoSoValue, spot Bitcoin ETFs secured $423.66 million over three consecutive trading sessions.
Simultaneously, Santiment noted that Bitcoin’s transaction volume and active addresses remained below the average weekday levels recorded from July to September.
Technical analysis suggested that Bitcoin needs to surpass $81,400 for a full recovery, with resistance identified between $82,000 and $82,500 thereafter.
A consistent climb above these thresholds could bring $84,202 back into play, while $80,000 is recognized as immediate support.
If selling pressure returns, potential support levels would be identified at $78,000 and $76,000.
Separate data on exchange flow showcased that 14,942 BTC had exited centralized exchanges ahead of the Fed decision, marking the largest daily net withdrawal in five weeks, according to Santiment. This suggested that some investors are transferring Bitcoin from trading platforms despite the cryptocurrency’s struggle to recover from recent declines.