Bitcoin Drops Nearly 1.5% as US Core CPI Surpasses Forecast

The unexpectedly high core Consumer Price Index (CPI) reading in the US led to a drop in Bitcoin (BTC) price, which fell nearly 1.5% to $56,168 at the time of this report.

US Headline CPI Aligns with Predictions, Core CPI Surpasses Expectations

The US headline CPI, a key measure for assessing national inflation trends, was reported at 0.2% month-over-month (MoM) and 2.5% year-over-year (YoY) for August 2024, matching forecasts. However, the core CPI (MoM) was recorded at 0.3%, edging out the anticipated 0.2% by economists.

To clarify, the distinction between headline CPI and core CPI lies in the components considered. While headline CPI encompasses all item categories, including housing, transportation, services, medical care, food, and energy, core CPI omits food and energy prices to provide a more consistent perspective on underlying inflation trends.

By excluding the prices of volatile items, core CPI is frequently regarded as a more reliable gauge for long-term inflation.

In response to the unexpected core CPI figure, Bitcoin’s price swiftly decreased from approximately $57,000 to $56,168 as of this writing. The broader cryptocurrency market reflected similar patterns, with Ethereum (ETH), Binance Coin (BNB), Solana (SOL), and Ripple (XRP) falling by 2.1%, 1.3%, 4.6%, and 2.4%, respectively.

With the CPI data for August 2024 now available, it appears nearly certain that the US Federal Reserve (Fed) will initiate its rate-cutting cycle with a 25 basis points (bps) reduction in September. In a note, Capital Economics’ Paul Ashworth stated:

Overall, we believe the Fed will commence its rate-cutting cycle with a modest 25 bps cut. The 3.2% annual core CPI increase was largely due to a 5.2% rise in shelter costs, while the three-month annualized core CPI only rebounded to 2.1% from a weaker 1.6%.

Indeed, following the CPI announcement, the odds of the Fed implementing a 25 bps rate cut next week surged to 83%, based on CME FedWatch data. If the Fed does cut rates by 25 bps, it is likely to boost confidence in both crypto and stock markets, as a 50 bps cut might suggest the Fed lacks full confidence in handling inflation.

What’s Next for Bitcoin?

As Bitcoin remains generally range-bound between $52,000 and $70,000 on the daily chart, analysts are contemplating the potential direction of the leading cryptocurrency’s price.

Some experts suggest that BTC’s current price movements resemble a similar consolidation pattern observed in 2023. Should the same trend occur in 2024, we might witness a new all-time high (ATH) for Bitcoin.

Additionally, the ramifications of the upcoming US Presidential Elections in November 2024 will be compelling to observe. Notably, some analysts who disregard the election outcome have indicated that regardless of who wins, BTC is expected to thrive in the long run.

At present, Bitcoin is trading at $56,168, with the overall cryptocurrency market capitalization at $1.94 trillion, reflecting a decline of 2.3% over the past 24 hours.