Bitcoin (BTC), the leading cryptocurrency, broke a record high in mid-August, surpassing $124,000. However, following this surge, the market has refocused on macroeconomic developments. The US Federal Reserve's (Fed) interest rate policies and released economic data, in particular, play a significant role in determining price action. According to the latest data, Bitcoin is currently trading at $109,782.62 and has declined 2.46% in the last 24 hours.
Fed rate cut expectations postponed until September
After the interest rate cuts expected in June and July failed to materialize, attention shifted to September. Fed Chair Jerome Powell recently offered mild signals regarding monetary policy at his Jackson Hole meeting. Powell emphasized that the balance of risks has shifted and suggested that the current restrictive stance may require adjustments in the future. This statement has strengthened the market's interest rate cut prospects.
Indeed, futures expectations have also become clearer. Markets are pricing in an 85% probability of a Fed rate cut in September. This expectation is also seen as supporting risk appetite in cryptocurrency markets.
PCE data came in line with expectations
The Personal Consumption Expenditures (PCE) price index, known as the inflation indicator most closely followed by the Fed in its monetary policy decisions, was released for July.
- Core PCE (Annual): 2.9% (expected 2.9%, previous 2.8%)
- Core PCE (Monthly): 0.3% (expected 0.3%, previous 0.3%)
- PCE Price Index (Annual): 2.6% (expected 2.6%, previous 2.6%)
- PCE Price Index (Monthly): 0.2% (expected 0.2%, previous 0.3%)
The data came in line with expectations, indicating that inflation in the US is progressing in a controlled manner. The fact that annual core inflation remained stable at 2.9% is a development to be closely monitored by the Fed.
Consumption and incomes on the rise
PCE data reflects not only price movements but also trends in consumption and income. Nominal personal consumption increased by 0.5% in July, accelerating compared to the previous month. Real personal consumption expenditures also rose by 0.3%. This suggests that American consumers continue to increase their spending despite inflation.
Meanwhile, personal income increased by 0.4% in real terms. This figure supports consumption trends and could influence the Fed's decisions. However, the widening trade deficit to $103.6 billion in July signaled weakness in other areas of the economy.
What's next for Bitcoin?
Losses in short-term interest rate futures contracts eased following the release of macroeconomic data. Investors are focused on the possibility of a September interest rate cut. This development could keep interest in risky assets alive. However, Bitcoin's decline below $110,000 in the short term suggests investor caution.
