Bitcoin (BTC) and the broader crypto market saw brief gains Friday following the release of US inflation data.
The Consumer Price Index (CPI) rose 0.4% in August, accelerating from a 0.1% increase in July, according to the Bureau of Labor Statistics (BLS). On an annual basis, CPI increased 3.4%, unchanged from the previous month and matching economist expectations.
Core CPI, which excludes volatile food and energy prices, rose 0.3% in August after increasing 0.2% in July. Annual core inflation eased slightly to 2.4% from 2.5%.
Despite the persistent inflation pressures, the crypto market responded positively. Bitcoin briefly rose above $79,000 after the inflation print, then retraced to near $77,000. Altcoins reacted similarly, with Ethereum (ETH) climbing above $2,600 for the first time since January before settling near $2,540.
In a statement on Friday, CoinShares noted that the latest inflation data was “not particularly helpful for Bitcoin.”
The firm noted that the inflation figures could strengthen the case for a September rate hike, reinforcing the risk that monetary policy remains restrictive. That outcome would present a near-term headwind for Bitcoin, particularly following the top crypto’s recent resistance as it attempts to move above $80,000.
CoinShares added that a sustained break above that level would require softer economic data, a more dovish shift from the Fed, or another notable policy catalyst.
The effect of the CPI pressure is clear on institutional demand for digital assets, with investors showing signs of caution. Digital asset investment products have reversed flows this week, with approximately $243 million in outflows so far, despite roughly $1.3 billion of inflows last week.
The CPI report also followed Thursday’s Producer Price Index (PPI) release, which showed wholesale prices increased 0.4% in August. Together, the inflation readings provide the Federal Reserve with its final major price data ahead of next week’s policy meeting.
Treasury pressure could become Bitcoin catalyst
Beyond monetary policy, CoinShares highlighted growing pressure in the US Treasury market as another important factor for Bitcoin. The firm said the Treasury’s expanded bond-buyback program has so far failed to materially reduce long-term yields, despite increased purchases at the longer end of the curve.
“While the programme may be helping liquidity, its inability to lower borrowing costs highlights the scale of the underlying pressure in the Treasury market,” CoinShares wrote.
The firm argued that persistent inflation, fiscal concerns and an elevated term premium continue to weigh on the Treasury market.
“Paradoxically, we think that failure could become increasingly supportive for Bitcoin over the longer term,” CoinShares added, arguing that continued pressure on long-term yields could increase calls for more aggressive Treasury intervention.
Such intervention could strengthen the debasement narrative supporting Bitcoin and Gold if investors interpret larger Treasury purchases as an attempt to suppress borrowing costs without addressing underlying fiscal concerns.
“If that happens, it could become one of the more powerful medium-term catalysts for Bitcoin,” CoinShares added.
Bitcoin is trading at $77,380, up 0.1% in the past 24 hours at the time of writing.
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