Bitcoin Rises Despite Hotter U.S. Inflation Data
Key Takeaways
- •Bitcoin was trading near $78,749, gaining 2% over 24 hours after reaching $79,607.
- •Core U.S. consumer prices increased 0.3% in August from the previous month, exceeding expectations.
- •CME FedWatch data showed traders pricing an 85% chance of higher interest rates by next week.
- •Rising oil prices linked to the war with Iran have added pressure to inflation and household costs.
- •Bitcoin’s recent gains were supported by regulatory developments, the proposed Clarity Act and expanded Treasury bond buybacks.
Bitcoin rose on Friday despite data showing that U.S. inflation accelerated, with the cryptocurrency climbing even as markets increased expectations that the Federal Reserve could raise interest rates next week.
The largest cryptocurrency by market capitalization was recently trading near $78,749, up 2% over 24 hours. Bitcoin reached as high as $79,607 on Friday morning in New York.
The move came after the release of U.S. consumer-price data showing that prices increased faster in August. The consumer price index excluding food and energy rose 0.3% from the previous month, exceeding expectations and reinforcing forecasts of a Federal Reserve rate increase at its meeting next week.
U.S. inflation has been difficult to contain amid the war with Iran, which has pushed oil prices higher and raised the costs of food, gasoline and other goods. Higher inflation typically increases the likelihood of higher interest rates, a development that could limit bitcoin’s ability to continue rising.
According to the CME FedWatch tool, traders estimate an 85% chance that interest rates will be higher by next week. The Federal Reserve is scheduled to meet next week and announce its decision on borrowing costs.
Bitcoin has typically performed well in lower-interest-rate environments, when increased liquidity can make it easier for people to buy the cryptocurrency. Federal Reserve Chairman Kevin Warsh, who took the position in January, said last month in his first speech as head of the U.S. central bank that he had “more work to do” to combat inflation.
The United States is facing an affordability crisis, while rising oil prices have become a prominent issue ahead of the midterm elections. U.S. President Donald Trump has assured voters that prices will come under control and has repeatedly pressured the central bank to lower interest rates.
Bitcoin recorded its biggest run in years in August after positive regulatory developments and an announcement from the U.S. Treasury. Treasury Secretary Scott Bessent said the department would double the size of its long-dated bond buybacks, a move that could benefit non-yielding assets such as bitcoin and gold. Bitcoin also gained after Trump urged lawmakers to advance the Clarity Act, a key piece of cryptocurrency legislation.
This article first appeared in Bitcoin Magazine and was written by Mathew Di Salvo.
