After noon last Friday, the price of BTC experienced a new rally that momentarily placed it above $66,500 per coin. The driver of that rise was the August PCE inflation report in the United States. Those figures would also be the key to the price of Bitcoin this coming week.
The personal consumption expenditure price index (PCE inflation in short) experienced a decline in August that exceeded market expectations. During the last year, prices showed a perceptible decline and remained at 2.2%, according to the North American country’s labor statistics office.
On a year-over-year basis, this represents a notable drop compared to the July report, when the PCE fell to 2.5%. The latter shows that the Federal Reserve’s decision to proceed with a 50 basis point rate cut a couple of weeks ago was correct.
All macro elements point to a soft landing situation being reached. This implies overcoming inflation without causing a recession. According to experts, soft landing is a rare and unlikely situation in history, but this would be the case.
Bitcoin price could continue to rise as widespread reaction to PCE inflation data. Source: CoinMarketCap
Effects of inflation this week on Bitcoin
For this week, the effects of the new drop in inflation could continue for the price of Bitcoin. It is worth highlighting that the PCE is of fundamental importance for financial markets. It is the favorite index of the Federal Reserve when taking measures related to monetary policy.
Hence, by remaining at 2.2%, inflation is one step away from the Fed’s 2% inflation objective. This implies that an economy with high interest rates like the current one is no longer necessary and the authorities must reduce rates as much as possible. as soon as possible. Failure to do so risks worsening the economic situation and causing a recession.
In simple words, all this means that the macroeconomic environment is favorable for a rise in BTC and the rest of the cryptocurrencies. As a result of this environment, institutional capital inflows into spot Bitcoin ETFs skyrocketed this week.
At the time of writing this note, the price of BTC is $65,700 after a small correction in the last few hours. However, Bitcoin will most likely resume the bullish path this week. On the other hand, it should not be assumed that there will only be room for profits.
We must not lose sight of the fact that risk assets tend to exhibit unpredictable behavior.
Disclaimer: This work is for informational purposes only and should under no circumstances be taken as an invitation or investment advice. Cryptocurrencies are highly volatile assets and placing capital in them can lead to total losses.
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