Bitcoin rebounded toward $80,000 on Friday after the latest US inflation data broadly met expectations, although stronger-than-expected core inflation and rising bond yields continued to weigh on market sentiment.
Bitcoin briefly climbed above $79,000 after initially falling toward $76,000. The cryptocurrency later gained more than 3% as traders digested the August Consumer Price Index (CPI) report.
The US CPI rose 3.4% year-on-year in August, while core CPI, which excludes food and energy prices, increased 0.3% month-on-month. The core reading was slightly above the 0.2% increase expected by economists.
Rising energy prices contributed to the overall inflation increase. Gasoline prices climbed 3.9% during the month, accounting for more than one-third of the monthly increase in the overall CPI, while the energy index rose 2.1%.
US stock markets also recovered following the inflation data. The S&P 500 was up around 1%, while the Nasdaq Composite gained about 1.1% at the time of reporting.
Bond markets remained volatile, with the US 30-year Treasury yield briefly reaching its highest level since June 2004 before easing to around 5.309%. Higher yields could create additional pressure on risk-sensitive assets such as Bitcoin by making government bonds more attractive to investors.
Meanwhile, traders increased their expectations for a 0.25 percentage-point Federal Reserve rate hike at the September 16 meeting. Market-based estimates showed the probability of such a move rising to 85%, compared with 60% a week earlier.
Federal Reserve officials remain divided over the appropriate policy path. Governor Christopher Waller has previously indicated that he could support keeping interest rates unchanged if inflation shows signs of cooling.
Trading firm QCP Capital warned that rising US Treasury yields could become a headwind for Bitcoin. According to the firm, higher yields combined with tighter monetary policy expectations could reduce demand for riskier assets.
QCP noted that Bitcoin could eventually benefit from increased market liquidity, particularly if US Treasury debt-buyback operations provide stronger support to financial markets. However, the firm suggested that such an impact could take time to emerge.
Bitcoin’s latest recovery therefore comes as investors balance improving risk appetite against persistent inflation concerns, elevated bond yields, and uncertainty over the Federal Reserve’s next policy decision.
