Despite the higher-than-expected CPI, Bitcoin has risen. What's the next move?

Maya173

"According to the Consumer Price Index (CPI) report on September 13th, despite a higher-than-expected increase, the price of Bitcoin surged today and is trading above $26,300. Following the release of the report, Bitcoin (BTC) regained strength and crossed the key level of $26,000.

Despite the overall increase in CPI, the annual core Consumer Price Index has decreased. The report shows that the overall CPI increased by 3.7% in August, higher than the 3.2% in July. The market appears to view the energy price increase, especially gasoline, which rose by 10.6% monthly, as temporary. Although gasoline costs are the second-largest household expense, gasoline prices have been decreasing year by year.

The annual core CPI, which measures all items except food and energy, showed more positive data. The core CPI for August had an annual rate of 4.3%, lower than the previous month's high of 4.7%. However, outliers may instill confidence in the overall market.

The possibility of inflation reaching the Federal Reserve's 2% target has given hope for a pause in the price surge, with investors believing that this outcome will benefit financial institutions and risk assets like Bitcoin.

For long-term tech assets, this remains a challenging environment, and it's not surprising that the digital asset market has recently struggled. The lack of new capital inflows into the sector is one reason. Many investors are choosing to keep their funds in high-yield savings accounts and money market funds due to persistently high interest rates. The recent strength in some commodities is also part of the problem, as it suggests that potential economic conditions remain relatively strong, and inflation is still a concern. As a result, available capital for deployment into cryptocurrencies is relatively scarce.

Institutional interest in Bitcoin has driven market sentiment. After Judge Neomi Rao's support for Grayscale Bitcoin Trust in a case against the SEC on August 29th, many major institutions applied for ETF spot Bitcoin.

Interest in Bitcoin from institutions like BlackRock and Fidelity has surged. Although both institutions delayed their decisions on BTC spot ETFs on September 2nd, Franklin Templeton, a $1.5 trillion asset management company, submitted an application to the SEC to register a spot Bitcoin ETF on September 12th.

So far, the SEC has not approved spot Bitcoin ETFs, despite multiple applications from various applicants, including BlackRock, Fidelity, ARK Invest, and 21Shares. BlackRock is the world's largest asset management company, managing over $8.5 trillion in assets. According to documents submitted to the SEC, the company will use Coinbase to hold BTC in trust.

The next deadline for the SEC to make a decision on this application is October 16th.

Bitcoin Exchange Supplies Continue to Decline

With the recent surge in Bitcoin prices, the supply of BTC on exchanges has continued to be lower than the monthly peak on September 4th. Since that monthly peak, exchanges have lost over 40,000 BTC.

The market views BTC leaving cryptocurrency exchanges as a bullish signal, as withdrawals of BTC are usually made by those looking to hold BTC long-term.

Interestingly, on-chain data shows that despite the bear market lasting a long time, many Bitcoin investors are preparing for a price surge. The number of wallets holding 0.1 BTC reached a historic high of 12 million on September 12th.

While Bitcoin has shown some short-term upward momentum following the CPI report and Franklin Templeton's ETF application, the Bitcoin Fear and Greed Index indicates that the market remains in fear, with a 9-point decrease from the previous month.

The next focus to watch will be the Federal Open Market Committee (FOMC) meeting on September 19th to 20th. Although the current 3.7% figure, compared to the exaggerated 9.1% last June, has clearly been effectively controlled, it is still significantly higher than the Federal Reserve's 2% target. As a result, the Federal Reserve raised the benchmark interest rate by 1 point to a range of 5.25% to 5.5% at the July FOMC meeting, marking a 22-year high.

Monetary policy is restrictive, and the Federal Reserve is currently forced to choose between economic recession and inflation resistance. Therefore, the attitude is likely to be more inclined to restore supply and demand balance in the market. The current monetary policy is entering a new phase, where the focus of future discussions is no longer how high the interest rates will rise this month but how long the high rates will be maintained.

For the September 20th meeting, the current market expectations are a 91% probability of no rate hike (maintaining rates), with a 5% probability of a rate cut in January next year, indicating that resisting inflation is no longer the Fed's top priority before the economic crisis."

Isha000

Whether it's a bull market or a bear market, this market is always changing. The key is to be able to make accurate assessments and enter at the right time.