Rate cut hopes boost Bitcoin above $66k

Bitcoin (BTC) bulls are firing on all cylinders in early trading on Friday after the August Personal Consumption Expenditures (PCE) index – the Fed’s preferred inflation gauge – showed a month-over-month increase of just 0.1%, below Wall Street forecasts.

Bitcoin price rose after rate cut

Bitcoin price rose slightly on Wednesday, extending an overnight rebound as risk sentiment improved amid increasing bets on a deeper U.S. interest rate cut following soft PPI data and an in-line CPI report.

The Bitcoin added 1% to $60,039.0 by 10:16 ET (10:16 GMT), having now recouped all of its steep losses logged during a market rout last week.

“Today’s lower-than-expected PCE numbers have strengthened the dovish sentiment sparked by last week’s rate cut, fueling optimism that inflation pressures are cooling faster than anticipated,” said Matt Mena, Crypto Research Strategist at 21Shares. “This encouraging backdrop has bolstered BTC, as investors gravitate toward risk assets, anticipating a more accommodative Fed stance going forward.”

“BTC had already anticipated the positive news and front-ran it,” Mena noted. “BTC closed above $65k last night – a level not seen since late July – while the broader crypto market surged, with many altcoins rallying sharply, some even reaching multiples of their Q3 highs.”

But further gains in Bitcoin were still limited as institutional inflows into the token remained constrained, while uncertainty over crypto’s regulatory outlook in the U.S. also weighed.

The most significant factors to watch are the continuation of easing monetary policy and the U.S. presidential election on November 5th. One of the main reasons for the current rally is the 50 bps rate cut in the U.S., as well as the PBOC’s rate cut.

It is important to monitor how monetary policy evolves and to keep an eye on the November FOMC meeting, where the market is currently pricing in a roughly 50:50 chance of either a 50 bps or 25 bps rate cut. The U.S. presidential election and the ongoing news surrounding it could have a considerable impact on the market.

Bitcoin slightly extends rebound on soft PPI, in-line CPI

Marginal gains in Bitcoin were primarily driven by lower-than-expected producer price index (PPI) inflation data on Tuesday. This fueled optimism that the upcoming consumer price index (CPI) report, set for release on Wednesday, would also show signs of easing inflation. A softer inflation outlook gives the Federal Reserve more flexibility to begin cutting interest rates as early as September.

“As inflation pressures ease, the narrative of a persistently dovish monetary policy gains traction, fueling demand for risk assets on a global scale,” he said. “While both crypto and U.S. stocks are benefiting, digital assets are significantly outpacing equities; the CoinDesk 20 Index, a large-cap crypto market benchmark, is up nearly 8% this week, compared to less than a 1% gain in the S&P 500. This highlights the growing confidence in BTC and digital assets as investors increasingly seek alternative stores of value and high-yield opportunities amid a favorable macroeconomic backdrop.”

Following the PPI data, market expectations for a 50 basis point rate cut increased, although some traders continued to price in the possibility of a smaller 25 basis point reduction.

Lower interest rates tend to benefit cryptocurrency price by boosting liquidity, which can flow into more speculative assets like Bitcoin.

On Wednesday, the U.S. released new inflation data for July, which largely aligned with market expectations.

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