Bitcoin Rebounds Above $79K as Inflation Data Meets Market Forecasts

Inflation Data Stabilizes Markets

Bitcoin bounced back above $79,000 on Friday following the release of August’s Consumer Price Index report, which came in line with market expectations according to the Bureau of Labor Statistics. This marked a stabilizing moment for markets after the previous day’s Producer Price Index had surprised to the upside.

The report revealed notable pressures in specific sectors. Gasoline prices jumped 3.9% during the month, accounting for more than one-third of the total monthly increase. The broader energy index climbed 2.1% over the same period, reflecting impacts from global supply constraints including the expanding US-Iran conflict. Core inflation, excluding volatile components, rose 0.3% in August—a figure that exceeded the 0.2% that many traders had anticipated.

Equities and Crypto Rally on Clarity

Bitcoin’s sharp reversal mirrored gains across traditional markets. After initially sliding to $76,000, the cryptocurrency reversed course, gaining more than 3% as the session progressed. The S&P 500 and tech-focused Nasdaq Composite posted gains of 1% and 1.1% respectively, suggesting that data clarity restored confidence to risk assets despite earlier uncertainty. The 30-year Treasury yield experienced sharp swings, initially reaching its highest level since June 2004 before retreating to 5.309%.

Federal Reserve Rate Expectations Shift Sharply

The inflation report reshaped market assumptions about the Federal Reserve’s next move. According to CME Group’s FedWatch Tool, betting markets assigned an 85% probability to a 0.25% rate increase at the Fed’s September 16 meeting, up significantly from 60% odds just one week prior. This shift underscored traders’ recalibrated expectations for inflation persistence.

The Fed itself remains internally divided on the appropriate policy path. Fed Governor Christopher Waller recently indicated he would favor maintaining rates within their current 3.50-3.75% range if economic data demonstrated meaningful progress toward price stability. Such disagreement reflects the central bank’s challenging position between inflation management and economic support.

Despite Bitcoin’s robust August performance—a 25% monthly surge following the Treasury’s announcement of expanded debt buyback operations—trading firm QCP Capital warned that elevated US Treasury yields pose ongoing headwinds for digital assets. The firm noted that yields driven by tighter policy expectations, rather than growth prospects, create a competing risk-free return that undercuts the growth narrative that previously fueled Bitcoin’s advance. QCP cautioned that Bitcoin would benefit only once Treasury buyback operations inject sufficient liquidity into financial markets.

Macro clarity in inflation readings demonstrates how traditional economic data continues to shape sentiment across all asset classes, including cryptocurrency markets.

Source: Bureau of Labor Statistics, via Cointelegraph. Not financial advice.