Bitcoin Price Surges Following Inflation Data

Bitcoin (BTC) traded above $66,000 on Friday, boosted by lower-than-expected inflation data that supports the U.S. Federal Reserve’s easing policy. This price point hasn’t been seen since late July.

Matt Mena, a crypto research strategist at 21Shares, stated that the lower personal consumption expenditure (PCE) numbers have strengthened the dovish sentiment following last week’s rate cut. This trend suggests that inflation pressures are diminishing faster than expected.

Mena highlighted that the recent inflation data sets a favorable stage for Bitcoin and the broader cryptocurrency market. Investors are turning towards risk assets, anticipating a more accommodating stance from the Fed. Bitcoin seems to have anticipated this positive news, effectively front-running it.

According to the 21Shares analyst, this supportive environment is expected to enhance investor confidence in risk assets like Bitcoin, potentially leading to a retest of the $68,000 to $70,000 range.

Positive Inflation Data Supports Fed Rate Pivot

The U.S. PCE data for August, the Fed’s preferred measure of inflation, fell sharply to 2.2%, down from 2.5%, marking the lowest level since 2021. Although the core PCE increased slightly to 2.7% annually, it only rose 0.1% monthly, which is half of economists’ expectations.

Moreover, personal income and spending figures also came in weaker than expected, backing the Fed’s decision to cut interest rates by 50 basis points on September 18.

Mena also noted global factors, including China’s liquidity injections and interest rate cuts, which are expected to enhance market liquidity and boost global M2, historically correlated with Bitcoin’s price.