Bitcoin trapped below $86K as PCE changes cloud inflation reading
Bitcoin erased its post-PCE gains as analysts cautioned that methodology changes complicated the lower-than-expected inflation reading.
Bitcoin's post-PCE gains were erased as analysts pointed out that changes in methodology complicated the lower-than-expected inflation reading. BTC held above $83,000 on Thursday, after giving back gains following the disappointing US inflation data. Coinbase data showed BTC/USD flat for the day, following a brief period of volatility ahead of September’s monthly and third-quarter closings.
Bitcoin started Q4, typically its strongest quarter, at around $83,550, following 42.7% growth in the third quarter, according to CoinGlass data. CoinGlass liquidation heatmap revealed potential clusters of liquidation exposure near $83,000 and $82,500, both crucial levels for Bitcoin's recovery from its June lows. Bitcoin's bullish run stalled on Wednesday, with BTC/USD falling back to $85,600 after an earlier surge.
This advance followed the unexpected drop in US inflation. The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, came in at 3.4% year-on-year in August, below expectations of 3.7%. Excluding food and energy, the PCE price index increased 3.0% from a year ago, according to the Bureau of Economic Analysis (BEA).
The release also accounted for changes in methodology that might reduce Core PCE inflation by up to 20 basis points. Market commentary suggested that markets would heavily discount the August reading. The S&P 500 and Dow Jones Industrial Average both fell slightly on Wednesday. FedWatch Tool data indicated a 37% chance of a quarter-point rate increase at the Fed's October meeting, with markets favoring a stable federal funds target range.
Glassnode noted a divergence between Bitcoin's price and Bitcoin-denominated open interest (OI), with price up 35% from August lows but OI down almost 20%. This discrepancy, with open interest at its lowest since March, might make Bitcoin's rally less susceptible to forced liquidations due to leverage. Sell orders around $85,000 and long-term holder coins in the $84,000–$85,000 range could offer resistance above the current price.
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