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The higher-than-expected US core consumer price index (CPI) reading was followed by a decline in the price of bitcoin (btc), which fell nearly 1.5% to $56,168 at press time.
US headline CPI meets expectations and core CPI exceeds expectations
The U.S. headline CPI, the metric typically used to assess the rate of inflation in the country, x.com/DeItaone/status/1833845616268419503″ target=”_blank” rel=”nofollow”>came in line with expectations at 0.2% month-on-month (MoM) and 2.5% year-on-year (YoY) for August 2024. However, core CPI (MoM) came in at 0.3%, slightly higher than the 0.2% forecast by economists.
For the uninitiated, the difference between the headline CPI and the core CPI is the components of the basket of items they measure. While the headline CPI measures all categories of items, including housing, transportation, services, health care, food, and energy, the core CPI excludes food and energy prices to provide a more stable view of underlying inflation trends.
By removing the price of volatile items from its calculation, the core CPI is often considered a more accurate indicator of long-term inflation.
Following the unexpected release of the core CPI, the price of btc experienced a rapid drop, falling from around $57,000 to $56,168 at the time of writing. The broader cryptocurrency market showed similar trends as ethereum (eth), Binance Coin (BNB), Solana (SOL), and Ripple (XRP), which fell by 2.1%, 1.3%, 4.6%, and 2.4%, respectively.
With August 2024 CPI data out, it seems almost certain that the US Federal Reserve (Fed) will begin its rate cutting cycle with a 25 basis point (bp) cut in September. In a note, Paul Ashworth of Capital Economics x.com/DeItaone/status/1833857712188215755″ target=”_blank” rel=”nofollow”>saying:
Overall, we continue to think the Fed will begin its rate-cutting cycle with a more modest 25 basis point cut. The 3.2% annualized core CPI was driven primarily by a 5.2% increase in house prices, while the three-month annualized core CPI rebounded only to 2.1% from a weak 1.6%.
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In fact, following the release of the CPI data, the probability of the Fed cutting rates by 25 basis points next week has risen to 83%. data According to CME FedWatch, if the Fed cuts rates by 25 basis points, this should generate some confidence in the cryptocurrency and stock markets.fearing A 50 basis point cut could signal that the Fed is not fully confident in its ability to address inflation.
What's next for bitcoin?
As btc remains within a flexible range between $52,000 and $70,000 on the daily chart, analysts are speculating on the future path the price of the leading digital asset could take.
Some analysts to give an opinion that btc’s current price action is reminiscent of a similar price consolidation in 2023. If the same scenario plays out in 2024, we could see a new all-time high (ATH) price for bitcoin.
It will also be interesting to see the impact of the US presidential election scheduled for November 2024. Interestingly, some agnostic election analysts have… fixed that no matter who wins the election later this year, btc is destined to win in the long run.
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At the time of writing, bitcoin is trading at $56,168, while the total cryptocurrency market cap stands at $1.94 trillion, down 2.3% over the past 24 hours.
Featured image from Unsplash.com, charts from cmegroup.com and TradingView.com
