Bitcoin swiftly rebounded from a drop to $76,000 after U.S. inflation data showed a 0.4% increase in August, with market expectations shifting for Fed rate hikes.
Following the release of the latest U.S. Consumer Price Index (CPI), which showed a 0.4% rise in August, Bitcoin briefly dropped to $76,000 before rebounding to over $78,700 within thirty minutes. The CPI report, published by the Bureau of Labor Statistics (BLS), indicated that the annual inflation rate remained at 3.4%, with a core CPI increase of 0.3%, exceeding the expected 0.2%.
Before the inflation data was unveiled, Bitcoin was trading at more than $77,000 on the Binance exchange. Its swift decline to $76,037 was short-lived as it quickly regained ground. Meanwhile, Ethereum also saw a significant rise, climbing from a low of around $2,432 to a peak of $2,623, currently trading at $2,603.
All top-10 cryptocurrencies by market cap followed suit, moving into positive territory, with ZEC and XRP recording the most substantial gains of 5.47% and 4.56%, respectively.
Inflation Drivers and Market Reactions
The increase in inflation was primarily attributed to a 3.9% rise in gasoline prices, which accounted for a significant portion of the monthly CPI increase. Energy prices climbed by 2.1% month-over-month, with year-over-year increases reaching 16.3%. Additionally, housing costs rose by 0.3%, while food prices saw a modest increase of 0.1%. Some costs, such as medical services and auto insurance, experienced declines.
In light of these inflation figures, market expectations shifted regarding monetary policy, with the probability of a 25 basis point rate hike by the Federal Reserve on September 16 increasing to 85.6%, up from 68% prior to the report.
The bond market displayed varied reactions, with the yield on two-year Treasury notes rising to 4.59%, while the ten-year yield fell to 4.92% after reaching an intraday high of 4.98%. Both the Nasdaq and S&P 500 indices saw gains of 0.8% in response to the data.
Notably, Bitcoin had previously dipped below $78,000 on August 28 after comments from Federal Reserve Chair Kevin Warsh, further highlighting the sensitivity of cryptocurrency prices to economic indicators.
