Fed Rate Cut More Likely After Inflation Data, Bitcoin Ready to Break $65K

The latest US Consumer Price Index (CPI) report shows July's inflation rate dropping to 2.9%, just below the expected 3%.

This decline has increased the likelihood of a rate cut in September, which could boost Bitcoin (BTC) to around $65,000.

Core CPI inflation, excluding food and energy, matched predictions at 3.2%. This is the first time since March 2021 that overall inflation has fallen below 3%.

Nansen’s Principal Research Analyst, Aurelie Barthere, highlighted that the disinflation trend from Q2 persists, particularly in services, energy, and housing costs. The “supercore” services inflation rate, closely monitored by the Federal Reserve, fell to 2% in July from 3.9% in June. Barthere suggested this deceleration might prompt the Fed to cut rates this year. While markets predict a 100 basis point cut by December, Nansen favors smaller cuts totaling 75 basis points.

The focus now shifts from inflation to real economic growth. Positive news on the US economy, especially consumer health, is essential for further recovery in equities and crypto.

Bitfinex analysts noted that a potential rate cut in September could lead to a Bitcoin rally and increased interest in risk assets. Lower interest rates typically boost liquidity and attract investors to speculative assets, possibly pushing Bitcoin to the $64,000-$65,000 range, a critical resistance level influenced by whale activity.

However, they warned that while a rate cut could initiate a bullish trend, large holders might sell, causing short-term volatility before a sustained rise.

In July, Bitcoin approached $65,000 as US stocks rebounded, driven by economic indicators like the PCE Index. Previously, Bitcoin hit $66,400 following positive April CPI data, fueling hopes for a Fed rate cut.

Bitcoin’s recent price movements around $65,000 have been influenced by various factors, including lower-than-expected inflation and weak retail sales. In March, significant whale purchases of over $1.2 billion in BTC during a market dip quickly restored its price to $65,000, creating anticipation for the next halving event.