Inflation is on the rise, leading traders to worry about the Fed’s potential actions amid ongoing macroeconomic uncertainty.
Summary
- The Fed’s preferred inflation gauge, the PCE price index, rose by 2.7% in August
- Inflation aligned with forecasts, yet the index increased compared to the previous month
- One industry expert notes that institutions are starting to take profits
The cryptocurrency markets are down, with Bitcoin slipping below $110,000 as inflation concerns impact perceptions of Fed policy. As of Friday, September 26, Bitcoin was trading at $109,640, a 1.6% decrease for the day, resulting in a weekly drop of 5.5%. The recent inflation data appears to be a primary driver of this negative movement.
Data from the Department of Commerce reveals that the Personal Consumption Expenditures price index increased by 2.7%, an uptick from July’s 2.6% growth. The core PCE index, excluding volatile elements like food and energy, saw a 0.2% rise last month, while July’s figure was also revised to 0.2%.
Although PCE inflation matched the projections, its acceleration has led to a more pessimistic economic outlook. This increase comes shortly after the Federal Reserve executed its first rate cut of the year, prompted by concerns over low employment and growth rates.
Implications of Rising Inflation on Bitcoin
As inflation rises, the Fed may be less inclined to maintain rate cuts, a scenario that could negatively affect high-growth assets like Bitcoin (BTC), which flourish in a low-interest-rate climate. Arthur Azizov, founder and investor at B2 Ventures, suggests this trend is leading institutional investors to take profits.
“Bitcoin’s dip below $109,000 indicates that the market is overheated and transitioning into a slowdown phase. ETF inflows, the main driver of this rally, have plummeted by over 50% in the past week, with only $930 million entering compared to more than $2 billion the previous week,” Arthur Azizov informed crypto.news.
He indicated that the critical support zone for Bitcoin is now between $108,000 and $108,500. A decline below this level could potentially push BTC down to $90,000 to $95,000.
