Bitcoin Price Prediction as Core Inflation Data is Announced – Can BTC Blast Past $30,000?

Press Release BTC Chart / Source: AdobeThe Bitcoin (BTC) price is little moved in the mid-$29,000s in wake of the latest core US inflation data that has reaffirmed that price pressures continue to ease in the US economy.

The Core Consumer Price Index (CPI) rose 0.2% MoM in July, in line with expected and unchanged from June, while the YoY metric rose 4.7%, a tad lower than the expected 4.8% and down slightly from June.

The data reaffirmed bets that the US Federal Reserve is done with interest hikes – as per the CME’s Fed Watch Tool, US money market futures last implied a small 9.5% chance that the Fed hikes interest rates by 25 bps again to 5.5-5.75% in September, down from around 14% prior to the data.

After a surprisingly powerful and durable surge in US inflation that began in mid-2021, the Fed embarked on a historic interest rate hiking cycle in early 2022, and has since raised interest rates by 525 bps in the last 17 months.

The Fed’s most recent hike came in July, when interest rates reached a 22-year peak at 5.25-5.50%.

Fed Rate Cuts Coming Soon?But Core CPI data is sending positive signals that underlying price pressures in the US continue to head in the right direction, reducing the pressure on the Fed to hike interest rates anymore.

If core price pressures remain at around 0.2% MoM for a full year, that implies a yearly inflation rate of only just above the Fed’s 2.0% target.

As per US money market futures pricing cited by the CME’s Fed Watch Tool, the market’s base case appears to be for the Fed to start cutting interest rates by the end of Q1 2024.

The fact that the Fed’s interest rate hiking cycle has likely ended and rate cuts are on the horizon is arguably a strong macro tailwind for Bitcoin.

As a reminder, the Fed cutting and holding interest rates at close to zero in 2020 and 2021 in response to the pandemic was a key driver of the 2020/2021 bull market.

Moreover, the Fed’s aggressive pivot to rate hikes in 2022 was a key driver of last year’s ugly Bitcoin price drop.

Bitcoin tends to prefer a lower interest rate environment because when yield for holding safe assets like US government bonds is lower, investors tend to move into riskier assets (as Bitcoin is still viewed) as they hunt for returns.

Bitcoin (BTC) Price Predictions Remain UpbeatShort and medium-term price predictions for Bitcoin remain upbeat, thanks to an improving fundamental outlook and the cryptocurrency’s still very strong technical setup.

As already noted, macro remains a modest tailwind for Bitcoin now that the Fed’s rate hiking cycle appears to be over, and that interest rate cuts are on the horizon.

That tailwind will strengthen the closer we get to actual rate cuts.

Crypto-specific fundamentals are also playing in Bitcoin’s favor right now, with the main theme being hype surrounding recent spot Bitcoin ETF applications from major Wall Street heavyweights like BlackRock.  » …

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Carla Contass

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