Bitcoin Rebounds to $79,000 After Hot Core CPI Keeps Fed Hike in Play

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Bitcoin rebounded above $79,000 on Friday after briefly dipping to $76,000, as investors digested a mixed August inflation report. Headline CPI rose 0.4% monthly and held at 3.4% annually, matching forecasts, while core CPI rose 0.3% monthly, above the 0.2% expected, though annual core inflation cooled to 2.4%, its lowest since 2021. The data increased the probability of a Federal Reserve rate hike at next week’s meeting to roughly 85%, according to CME FedWatch. Grayscale’s Zach Pandl called the situation a “speed bump” for crypto, predicting shallow dips. Ethereum led major altcoins higher with a 7.48% gain, while total crypto market capitalization approached $2.7 trillion. The Crypto Fear & Greed Index jumped to 73, signaling renewed greed, though spot Bitcoin ETFs still recorded net outflows of $330.5 million.

Key Elements

Bitcoin climbed back above $79,000 on Friday after an initial dip, as investors absorbed a mixed U.S. inflation report that left the door open for the Federal Reserve to raise interest rates at its meeting next week. The largest cryptocurrency fell toward $76,000 immediately after the data release, then reversed course as traders weighed a cooler annual core inflation reading against a hotter monthly figure.

The Bureau of Labor Statistics reported that the Consumer Price Index rose 0.4% in August from the prior month, leaving the annual headline rate at 3.4%, matching consensus forecasts. Core CPI, which strips out volatile food and energy costs, rose 0.3% month over month, above the 0.2% economists had penciled in. On an annual basis, core inflation cooled to 2.4% from 2.5% in July, its lowest level since 2021.

The data lands five days before the Federal Open Market Committee convenes for its September 15-16 policy meeting, the last major inflation reading Chair Kevin Warsh and his colleagues will see before voting. Three regional Fed presidents dissented in favor of a hike at the July meeting, and Warsh used his first Jackson Hole keynote to say the central bank still has “work to do” on inflation.

Rate expectations shifted higher following the release. The CME FedWatch Tool, which tracks probabilities implied by 30-day Fed funds futures, showed roughly an 85% chance of a 25-basis-point increase at the September meeting, up from 68% before the data. Prediction markets were slightly more cautious: Polymarket priced the same outcome at 62%, while Myriad, the platform run by Decrypt’s parent company Dastan, had it at 61%. The two-year Treasury yield, highly sensitive to expected policy rates, rose 4.4 basis points.

The hawkish repricing had been building for weeks. Hike odds stood at 72% a day earlier, 59% one week earlier, and 48% one month earlier, meaning Friday’s report strengthened an existing trend rather than creating one on its own.

Zach Pandl, head of research at Grayscale, described the inflation mix as a potential short-term challenge for digital assets. He characterized the situation as a “speed bump” scenario for crypto, noting that the firmer core reading increases the likelihood of a rate hike. However, Pandl said he does not expect an extended or deep decline in cryptocurrency prices. “In my opinion, dips will be shallow and will create an opportunity for allocators that missed the August price jump,” he said.

Economist Robin Brooks echoed the concern, arguing that another rate hike is more likely given the higher-than-hoped-for CPI figures. Jim Bianco, founder of Bianco Research, estimated the probability of a hike closer to 90%.

Not all analysts viewed the report as bearish for digital assets. James E. Thorne observed that the current reading supports the view that U.S. inflation is gradually trending lower. Geiger Capital noted that core inflation has reached its lowest point since 2021, suggesting progress toward the Fed’s long-term 2% target.

Longer-term signals in traditional markets were calmer. The dollar was broadly flat, and the 10-year Treasury yield fell after its initial move higher. Traders appear to have increased the chance of a near-term hike without pricing a substantially worse inflation path beyond it, which was enough to support risk assets in the first hours after the report.

Crypto markets rallied broadly, with gains extending well beyond Bitcoin. Ethereum led the majors higher, up 7.48% on the day to reclaim $2,611, while Solana climbed 4.53% back above $100. XRP gained 4% between two CoinMarketCap snapshots taken before and after the CPI release, and Zcash added 5%. Zcash was the standout across the top 10, up 23.09% over the past week alongside a 4.71% daily gain. Total crypto market capitalization climbed back toward $2.7 trillion.

The CMC20 index, which tracks the broader market, rose 3% between the snapshots. The table below shows how major assets moved from the moment of the CPI release to later in the session.

Note: Figures reflect CoinMarketCap snapshots taken at the CPI release and later in the session.

Sentiment swung hard with the price action. The Crypto Fear & Greed Index, which had slipped to 56 after Thursday’s hot producer-price report, jumped back to 73, firmly in greed territory. The Altcoin Season Index sat at 38, meaning Bitcoin still dominates the ecosystem as traders lack appetite for higher-risk altcoins.

Spot Bitcoin ETFs continued to show net outflows of roughly $330.5 million on the day, a reminder that the rally has not yet pulled fresh institutional money off the sidelines. Derivatives activity climbed alongside the move, with open interest across crypto futures rising 1.52% to $429.99 billion and 24-hour trading volume up 2.27% to $877.11 billion. The volatile session triggered $897.09 million in liquidations, split between $493.85 million in long positions and $403.24 million in shorts.

Bitcoin opened Friday at $76,529 and briefly dipped toward the day’s $76,040 low in the minutes after the CPI print, an initial hawkish reaction before the market reversed hard. Bulls took over from there, pushing BTC as high as $79,837 through the session before it settled near $79,007, a 3.24% gain on the day and within striking distance of the psychologically significant $80,000 mark.

The chart’s biggest structural shift involved the exponential moving average. Bitcoin’s 50-day EMA has now crossed above its 200-day counterpart, forming a golden cross, a setup traders read as confirmation that the medium-term trend has flipped bullish. However, the signal is not technically confirmed yet, as there is not yet a significant gap between the two averages. The Relative Strength Index sat at 59.7, bullish territory but well below the 70 reading that would flag the move as overbought. The Average Directional Index read in the 40s, comfortably above the 25 threshold that separates a real trend from noise, with the DI+ line above DI- confirming buyers remain in control.

The key zone to watch sits below current prices. A Fibonacci retracement drawn off the summer’s $68,858 low to the $82,281 high hit in late August puts Bitcoin’s golden zone, the retracement band bulls need to defend, between $73,986 and $75,569. Above that, the $82,281 high from late August remains the level that needs to break for the rally to extend before the Fed’s rate decision on Wednesday at 2 p.m. ET.

The next test for the market will be whether Bitcoin can hold above $79,000. Short-dated Treasury yields and the dollar matter just as much: a renewed rise in both would challenge the move by tightening financial conditions before the Fed meeting.

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Source: finance.biggo.com