Bitcoin’s Price Wavers Ahead of Upcoming August CPI Data

Essential Insights

The price of Bitcoin rose 2% before leveling off ahead of the upcoming CPI data release.
The market expects a potential interest rate reduction at the FOMC meeting, depending on the CPI results.

The value of Bitcoin jumped approximately 2% to $57,900 on Tuesday, although the upward movement paused in anticipation of the upcoming August Consumer Price Index (CPI) data, as reported by CoinGecko.

The significant data release is set for 8:30 a.m. ET and is likely to influence the Federal Open Market Committee’s (FOMC) decisions regarding interest rates in the following week.

Analysts predict that August’s CPI report will display a continued reduction in inflation, forecasting the annual rate to drop to 2.5%, down from 2.9%. Monthly consumer prices are expected to see a slight increase of 0.2%.

Should inflation continue trending downwards towards the Federal Reserve’s (Fed) 2% target, it would indicate that the Fed’s measures are effective, implying that the economy could attain a soft landing.

Additionally, the sluggish labor market has initiated dialogue among Fed officials regarding a potential policy shift aimed at fostering economic growth.

Some Fed officials, including Governor Chris Waller, have hinted that it might be an appropriate moment to revise the federal funds rate target range, suggesting that the Fed is open to relaxing monetary policies.

According to the latest data from CME FedWatch, investors are increasingly convinced that the central bank will decrease interest rates during the upcoming FOMC meeting. The current focus is on the extent of the rate decrease, with probabilities leaning 67/33 in favor of a 50 basis point decline over a 25 basis point cut.

There is increasing assurance that the central bank may proceed with rate cuts.

Conversely, if inflation surges unexpectedly, financial markets, including the crypto domain, may be caught off guard, rendering such cuts unwarranted.

At the time of reporting, most cryptocurrencies are experiencing declines. Bitcoin and Ethereum have both fallen by 1% in the last 24 hours, with current prices around $56,500 and $2,300, respectively, based on CoinGecko’s data.

As the CPI report approaches, alternative coins are also showing signs of retreat. Among the top 100 cryptocurrencies by market capitalization, Aave (AAVE) topped the 24-hour gains with a rise of 12%, closely followed by Internet Computer (ICP) with a 10% increase, as reported by CoinGecko.

Throughout the same period, Dogwifhat (WIF) recorded the most significant drop, plummeting nearly 8%, while Arweave (AR) and Starknet (STRK) also faced declines.

The total cryptocurrency market capitalization has diminished by 1.6% over the past day, currently resting at $2.08 trillion.