Bitcoin traded in a volatile range near $77,000 to $80,000 on Thursday as markets digested August inflation data that clouded the outlook for Federal Reserve monetary policy. The Consumer Price Index rose 0.4% from July, accelerating from the prior month's 0.1% increase and complicating expectations for interest rate relief, according to CryptoSlate.
The inflation report initially triggered a brief rally in risk assets. Bitcoin spiked toward $80,000 and U.S. equities turned green as traders reacted to headline figures that met expectations in some areas, Cointelegraph reported. However, the gains proved fleeting as market participants grappled with underlying details suggesting persistent price pressures.
Core CPI, which excludes volatile food and energy components, rose 0.3% in August—faster than forecast—though the yearly pace of 2.4% represented the slowest rate since early 2021, according to CoinDesk. This divergence between headline and core inflation created mixed signals for policymakers. Bitget analyst Lewis Huang noted the acceleration in headline inflation was driven by energy costs while core inflation continues to ease, The Block reported.
The inflation data left Bitcoin investors facing what CryptoSlate characterized as an "expensive dilemma"—exposure to a prolonged period of elevated borrowing costs as the Federal Reserve maintains its cautious stance on rate reductions. Market pricing reflected this uncertainty, with Fed hike odds hovering near 62% even as inflation held steady at 3.4% annually and core measures cooled on a yearly basis, according to Decrypt.
The fixed-income market reacted sharply to the inflation print, with bond yields reaching a 22-year high. This dynamic typically creates headwinds for non-yielding assets like Bitcoin, though the cryptocurrency's initial resilience surprised some observers. Bitcoin Magazine noted that Bitcoin "shrugged off" the hot inflation data with an initial price spike, even as the implied threat of rate hikes loomed.
By later sessions, however, the risk-off sentiment reasserted itself. Bitcoin gave up early gains and sank toward $77,000 as markets moved to price in multiple rate hikes, according to CoinDesk live updates. The broader cryptocurrency market suffered alongside Bitcoin, with 95 of the CoinDesk 100 declining over the preceding 24 hours and Zcash leading losses, CoinDesk reported. Bitcoin itself had shed more than 5% on the week.
Analysts suggested that traders may ultimately look past an expected Fed hike to assess what elevated rates signal about underlying economic strength, CoinDesk noted. The August inflation report arrives at a critical juncture for monetary policy, with markets previously anticipating a pivot toward easing that now appears increasingly distant as policymakers confront sticky price pressures.