Bitcoin’s price gains strength despite today’s CPI report reflecting a slight energy price-induced increase in inflation.
Bitcoin’s price is up today, trading over $26,300 despite a higher-than-expected rise in inflation, according to the Sept. 13 Consumer Price Index (CPI) report. Bitcoin (BTC) regained the key $26,000 level sharply after the report’s release, giving confidence to traders and analysts who see this level as crucial.
Let’s look into the reasons why the Bitcoin price is up today.
Annual core CPI falls despite an overall uptick in inflation
Bitcoin’s price and equities markets gained momentum after the release of the CPI report. According to the report, the overall CPI rose 3.7% in August, higher than the 3.2% in July.
The market seemed to view energy price rises as temporary, particularly for gasoline, which showed a 10.6% monthly increase. Although gasoline costs are the second-largest expense for households, prices are down on an annual basis.
The annual core CPI model, which measures all items minus food and energy, showed more positive data. August annual core CPI came in at 4.3%, which is less than the previous month’s jump of 4.7%. Still, outliers may be providing confidence to the overall market. The United States Bureau of Labor Statistics noted on annual core CPI:
“The shelter index increased 7.3 percent over the last year, accounting for over 70 percent of the total increase in all items less food and energy.”
The potential that inflation may reach the Federal Reserve’s 2% target is providing hope that interest rate increases will be paused, an outcome that investors believe benefits risk assets like Bitcoin. According to Quinn Thompson, head of growth and capital markets at Maple:
“This is still a really challenging environment for long-duration tech assets, and it shouldn’t be all that surprising that the digital asset market has been struggling of late. There’s a lack of fresh capital flowing into the space. With interest rates remaining high, many investors are choosing to park their money into high-yielding savings accounts and money-market funds. The recent strength across a number of commodities also is part of this problem because it highlights how underlying economic conditions are still relatively strong and that inflation is still an issue. Until that ends, capital availability in terms of being able to be deployed into crypto will be relatively scarce.”
Institutional interest in Bitcoin boosts market sentiment
After U.S. Court of Appeals Circuit Judge Neomi Rao sided with the Grayscale Bitcoin Trust in its case against the U.S. Securities and Exchange Commission (SEC) on Aug. 29, many large institutions filed for exchange-traded funds (ETFs).
There is also growing institutional interest in Bitcoin from companies like BlackRock and Fidelity Investments. While both institutions had BTC spot ETF approvals delayed on Sept. 2, the $1.5 trillion asset manager Franklin Templeton filed with the SEC for a spot Bitcoin ETF on Sept. 12.
To date, the SEC has refused to approve a spot Bitcoin ETF, despite numerous applicants, including BlackRock, Fidelity, Cathie Wood’s ARK Invest and 21Shares, which has filed for approval three times.
BlackRock is the world’s largest asset manager, with over $8.5 trillion in assets under management. The firm will also utilize Coinbase to custody the BTC in the trust, according to the filing with the SEC.
The SEC’s next deadline for deciding on the application is Oct. 16.
Related: How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in
Bitcoin on exchanges continues to drop
Coinciding with Bitcoin price gains, the BTC supply on exchanges continues to remain below the Sept. 4 monthly peak. Exchanges have shed over 40,000 Bitcoin since that monthly peak.
The market perceives coins leaving crypto exchanges as a bullish signal, given traders typically withdraw their BTC when they want to hold it in self-custody long-term.
Interestingly, on-chain data shows that despite the elongated bear market, large swaths of Bitcoin investors are positioning for a BTC price rally, as the number of wallets holding 0.1 BTC reached an all-time high of 12 million on Sept. 12.
Related: Bitcoin to hit $100K in 2024? Canaan VP weighs up 2024 halving opportunities
While Bitcoin’s price is showing some bullish momentum in the short-term after the CPI report and Franklin Templeton ETF application, the Bitcoin Fear and Greed Index shows the market is still fearful, down nine points compared to the previous month.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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