Bitcoin eyes $63K as US CPI relief sends September Fed rate pause odds to 60%

Bitcoin is approaching $63,000 as a potential Fed rate pause is becoming more likely following surprisingly mild US CPI inflation data. The Consumer Price Index (CPI) for July came in at 0.1% month-over-month and 3.4% year-over-year, matching expectations. The index for shelter rose by 0.1%, while the food index increased by 0.1%. In contrast, the energy index fell by 1.5%. While US stocks were relatively calm after the CPI release, crypto investors remain cautious.

The odds of the Federal Reserve maintaining its current 3.50-3.75% interest rate target at the September meeting have increased to 60%, up from 30% a month ago. This suggests that the Fed may avoid raising rates, which could be beneficial for crypto and risk-asset liquidity conditions. Fabian Dori, CIO at Sygnum Bank, noted that an in-line CPI print, combined with weak labor market figures, could bolster the argument for a rate pause. This outcome would support crypto markets and liquidity conditions.

CME Group's FedWatch Tool currently shows a 60% chance of the Fed keeping rates unchanged at the September meeting, up from 30% a month ago. Andrei Grachev, managing partner at DWF Labs, pointed out that Bitcoin options markets are still pricing in a significant premium for downside protection. For example, downside strikes near $60,000 are being sold at higher prices than equivalent upside strikes near $70,000.

This premium may start to ease with the upcoming July Producer Price Index (PPI) data, which had previously followed CPI in coming in below expectations.

Analyst Rekt Capital warned that each bounce from $63,000 is becoming increasingly shallow, with support at this level weakening. He noted that the 50-month exponential moving average (EMA) for Bitcoin, currently at $65,827, has become new resistance. Bitfinex Alpha, the research arm of crypto exchange Bitfinex, also highlighted this overhead resistance zone, observing that Bitcoin has not recorded a single daily close above $65,000 since July 26.