Bitcoin prices rebound to $78,000, CPI data close to expectations

Core Points

August consumer price index (CPI) data was close to expectations, pushing Bitcoin prices back to around US$78,000. Among several key indicators released, only the core inflation rate was slightly higher than expectations, and the rest of the data were in line with forecasts. The previous week's decline was mainly driven by high producer prices and rising oil prices. Currently, market traders are still leaning towards the Federal Reserve to raise interest rates next week, so the real test is still ahead.

Analysis of inflation data: Not completely "overheated"

On Friday, as the August consumer price index (CPI) was released and the results were basically in line with economists 'expectations, Bitcoin prices rebounded to about $78,000. The result eased concerns that hot inflation readings could force the Federal Reserve to raise interest rates next week. Data showed that the core CPI rose 0.3% month-on-month, slightly higher than the expected 0.2%; the overall inflation rate on a month-on-year basis was 3.4%, and the core inflation rate was 2.4%, both of which were fully in line with expectations. After the data was released, the price of Bitcoin fell to around $76,700, and then rebounded, rising by about 0.4% in 24 hours.

Looking back at this week's trend, the actual decline occurred before the data was released. If the report is disassembled and analyzed, the label of "overheating inflation" is not completely accurate. Three of the four key data sets accurately match consensus expectations. The only thing that exceeded the forecast was the month-on-month core CPI-the Fed's preferred measure of underlying pressure, but the excess was only the smallest margin in the data report.

Gasoline prices are the main factor driving up overall inflation, rising 3.9% month-on-month, accounting for more than one-third of the overall increase. This suggests that August's inflation was more an energy story than a demand story. Energy prices rose by 16.3% year-on-year. Specific data are as follows:

• Overall CPI MoM: +0.4%(in line with expectations)
• Core CPI MoM: +0.3%(0.2% above expectations)
• Overall CPI YoY: +3.4%(in line with expectations)
• Core CPI YoY: +2.4%(in line with expectations)

The decline stems from before the data release, not after

Bitcoin was already weak when it opened on Friday. Its price exceeded US$82,000 late last month, but macro pressure pushed it lower in the following week. Thursday's producer price index (PPI) report exacerbated the trend, showing wholesale inflation at an annualized rate of 5.4%, above expectations of 5.3%. Among them, diesel prices surged 24.1% in a single month, and conflicts near the Strait of Hormuz pushed Brent crude oil prices to exceed US$105. At the same time, the yield on the 10-year Treasury note soared to 4.95%, its highest level since late 2023, undermining investors 'appetite for risky assets. When the CPI data was broadly in line with expectations, most of the bad news was included in prices. The subsequent rebound was more of a soothing action. However, according to FedWatch data, the probability of a rate hike jumped to 90%.

Why is the impact of interest rate hikes still significant even if there are signs of easing

Recovery has not eliminated the impact of the Fed's policies. When policymakers raise interest rates, returns on cash and short-term treasury bonds increase, raising the opportunity cost of holding non-yielding assets such as Bitcoin. Yields close to 5% attract investment funds seeking lower-risk risks, and the strong U.S. dollar also adds to this appeal. The meeting from September 15 to 16 has become a binary event node. If the Fed raises interest rates (raises its target interest rate range to 3.75%-4.00%), or sends hawkish signals while keeping rates unchanged, the support level of $76,000 or even $74,450 will face reconsideration. Conversely, if the suspension of interest rate hikes is described as "data-dependent", bulls are expected to hit the US$80,000 mark.

Performance of major cryptocurrency markets

Bitcoin closed at US$77,502, up 0.44% in 24 hours; Ethereum closed at US$2,490, up 2.15% in 24 hours;Solana closed at US$100.85, up 0.82% in 24 hours;XRP closed at US$1.35, down 0.84% in 24 hours. Ethereum outperformed Bitcoin in the rebound, Solana became popular, and XRP fell slightly. The sharp swings in major asset prices can be attributed to leverage: about $500 million of positions have been liquidated in the past 24 hours, of which about $394 million are long positions, and this forced liquidation has made the previous decline feel more rapid than it actually was.

Market sentiment cooled down within a week, and the "Fear and Greed Index" slipped from 82 (Extreme Greed) on August 27 to 67. Although it did not enter the fear zone, the degree of fanaticism has significantly subsided.

Institutional views diverge

Major institutions have different views on the future path: JPMorgan Chase expects the first rate hike to occur in December instead of September, believing that the Fed has another opportunity to show patience; Barclays Bank predicts a rate hike of 25 basis points in September and December, which is within the hawkish forecast range;21Shares strategist Matt Menase pointed out that if the Fed suspends interest rate hikes, Bitcoin may reach $100,000 in the fourth quarter, citing stable ETF demand and shrinking exchange balances.

Fed's decision will clarify what CPI implies

Differences between traders and forecasters are a tension point worth noting next week. Futures markets are pricing interest rates close to 70%, but a Reuters survey showed that about 70% of economists expect no change. Therefore, when the decision is implemented, one party will be forced to re-price. At the same time, two quieter signals weakened the bearish argument: the U.S. spot Bitcoin ETF had a net inflow of $603 million in the first six trading days of September; and crypto assets were leaving the exchange rather than flowing in, which often points to easing selling pressure. In addition to the Federal Reserve, another date worth noting is September 15, when the Senate votes on the CLARITY Act, despite forecasts that markets see little chance of the bill becoming law this year.