1 week ago
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Bitcoin bulls were hoping the August inflation report would give them something to work with. CoinShares says it didn’t.
In a market update published on September 11, the digital asset investment firm laid out why the latest Consumer Price Index data does essentially nothing for Bitcoin’s short-term price trajectory. The headline number came in at 3.4% year-over-year and 0.4% month-over-month, both matching consensus forecasts. But the real problem sits one layer deeper.
Core CPI is the villain here
Core CPI, which strips out volatile food and energy prices to reveal the stickier inflation underneath, rose 0.3% month-over-month. Wall Street had penciled in 0.2%.
CoinShares emphasized that the hotter core reading has meaningfully increased the probability of a Federal Reserve rate hike at the upcoming September 15-16 meeting. For an asset class that has spent years rallying on cheap money and retreating when the liquidity tap tightens, this is not the signal Bitcoin needed.
Bitcoin has been trading in the $77,000 to $78,000 range following the CPI release. Previous sessions saw the asset attempt to push above $80,000, but those moves didn’t stick.
$243 million heads for the exits
Digital asset investment products saw $243 million in net outflows in the week following the CPI release, according to CoinShares. The prior week had attracted $1.3 billion in inflows. That’s a swing of more than $1.5 billion in net investor sentiment in the span of seven days.
The macro headwind that won’t quit
CoinShares’ analysis noted that the CPI data signals an extension of the restrictive monetary policy environment, one where the Fed keeps rates elevated to grind inflation back toward its 2% target. With headline CPI still sitting at 3.4% year-over-year, that target remains uncomfortably far away.
The core reading at 2.4% year-over-year is closer to the goal but trending in the wrong direction on a monthly basis. A 0.3% monthly increase when 0.2% was expected is momentum heading the wrong way.
What to watch next
The September 15-16 Fed meeting is now the single most important near-term catalyst for crypto markets. If the committee opts for another rate hike, Bitcoin could face renewed selling pressure. A hold might offer some relief, though the messaging in the accompanying statement and press conference will matter just as much as the decision itself.
CoinShares’ conclusion is measured but clear. Until the economic data shifts in a more accommodative direction, Bitcoin’s path of least resistance may well be sideways, or lower.
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