Bitcoin has recently traded above $66,000 for the first time since late July, driven by positive inflation data released on Friday. The lower-than-expected personal consumption expenditure (PCE) numbers have reinforced the dovish sentiment initiated by last week's rate cut, suggesting that inflation pressures may be cooling more swiftly than anticipated.
According to Matt Mena, a crypto research strategist at 21Shares, this recent inflation report creates a favorable environment for Bitcoin and the overall cryptocurrency market. "Investors are gravitating towards risk assets, anticipating a more accommodative stance from the Fed moving forward. Bitcoin had already anticipated today's positive news and effectively front-ran it," he stated in an email to The Block.
Mena noted that this supportive backdrop is likely to bolster risk assets such as Bitcoin, enhancing investor confidence and paving the way for a potential retest of the $68,000 to $70,000 range.
The U.S. personal consumption expenditure (PCE) data for August, the Federal Reserve’s preferred measure of inflation, moderated sharply to 2.2%, down from 2.5%. This marks the lowest level since 2021. Although the core PCE report rose slightly to 2.7% on an annualized basis, the monthly increase of 0.1% was significantly below economist expectations.
Additionally, both personal income and spending figures were lower than anticipated, reinforcing the Fed's decision to cut interest rates by 50 basis points on September 18. Mena highlighted that other global factors, such as China’s liquidity injections and widespread interest rate cuts, are likely to enhance market liquidity further. This is expected to boost global M2—a measure of the global money supply—which has historically shown a strong positive correlation with Bitcoin’s price.
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