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BTC Bitcoin bucked the trend and broke the US$78,700 mark against the background of accelerating inflation.
Bitcoin prices climbed sharply on Friday. Even though new data showed that U.S. inflation accelerated in August, its upward trend remained strong. Bitcoin, the largest cryptocurrency by market capitalisation, has gained 2% in the past 24 hours and is trading at close to $78,749. Bitcoin hit a high of $79,607 in early New York time.
Inflation Data and Federal Reserve Outlook
The latest consumer price index (CPI) shows that core inflation, which excludes volatile food and energy costs, rose 0.3% month-on-month in August. The data exceeded analysts 'expectations and exacerbated market speculation that the Fed may choose to raise interest rates at next week's meeting.
Continuing geopolitical tensions, especially over Iran, have pushed up oil prices. The resulting rise in energy costs affects food and a variety of commodities, making it more difficult for policymakers to control inflation. Historically, high inflation levels have often prompted the Federal Reserve to raise interest rates to slow economic activity and curb price growth. Such tightening measures tend to reduce market liquidity, putting downward pressure on risky assets, including Bitcoin.
According to trader data using CME's FedWatch tool, the probability that the Fed will raise interest rates next week is as high as 85%. The upcoming policy decisions will affect borrowing costs and may affect the outlook for digital assets and other markets. Typically, Bitcoin responds positively to the interest-rate interest-rate environment because low interest rate conditions can increase market liquidity and make non-yielding assets more attractive to investors.
Federal Reserve Chairman's Statement and Policy Guidelines
Federal Reserve Chairman Kevin Warsh, who took office in January this year, delivered a speech on the inflation challenge last month. In his first policy speech as central bank governor, Washi said there is "more work to be done" to deal with continued price pressures.
The United States is experiencing an affordability crisis driven by factors such as rising energy costs. Rising oil prices have become one of the major topics in the run-up to the midterm elections. President Donald Trump has repeatedly assured the public that measures will be taken to control price increases. He also publicly pressured the Federal Reserve to lower interest rates in the hope of bringing relief to consumers.
Treasury Secretary Scott Bessent recently revealed that the Treasury Department will double the size of long-term government bond buybacks. The move aims to increase demand for non-yielding assets such as Bitcoin and gold. In August, Bitcoin experienced its strongest rebound in years, backed by positive regulatory developments and measures from the U.S. Treasury Department. In addition, the cryptocurrency market also benefited greatly after President Trump encouraged lawmakers to pass the Clarity Act, key crypto legislation designed to provide a clearer regulatory framework for the digital asset industry.
Despite the challenge of high energy prices and consumer prices, the Federal Reserve still faces difficulties in controlling inflation. However, Bitcoin has broken through $78,700 strongly, and market participants are closely watching the upcoming Federal Reserve policy decisions.
Dictionary of Terms
CME FedWatch Tool: A platform provided by CME Group to monitor market expectations for the Federal Reserve's interest rate decisions based on futures pricing.
