Key Highlights
- Bitcoin dropped below $78,000 after U.S. PCE inflation rose more than expected, raising concerns about the outlook for interest rates.
- BTC had earlier reached $81,235, its first move above $80,000 since May, before reversing after the inflation report.
- Crypto-related stocks also declined, with American Bitcoin falling 8%, Circle dropping 5.13%, and Strategy losing 4.58%.
Bitcoin (BTC) traded near $78,000 on Wednesday after new U.S. inflation data showed that prices were rising faster than expected. The move came just hours after Bitcoin climbed above $80,000, while several crypto-related stocks also fell as traders assessed the inflation data and its potential implications for U.S. interest rates.
Before the report was released, Bitcoin was trading for $78,655 as of 12:30 PM UTC after reaching an intraday high of $81,235.03. It was the first time BTC had traded above $80,000 since May, according to CoinMarketCap data.
After the inflation report was released, Bitcoin dropped back toward $78,000 before briefly recovering to $78,079 at the 4:30 PM UTC. At this level, it was still down 1.63% over the previous 24 hours.
According to CoinMarketCap data, Ethereum, the second-largest cryptocurrency, was also affected. The token’s price dropped from a daily high of $2,450 to a current trading for $2,444. BNB, XRP, and Solana lost 0.56%, 0.09%, and 1.33%, respectively.
PCE inflation comes in hotter
The reversal came as traders reacted to the latest inflation figures and their possible effect on U.S. monetary policy. The Personal Consumption Expenditures (PCE) tracks changes in the prices people pay for goods and services in the United States and is closely watched because it is the Federal Reserve’s preferred measure of inflation.
For July, the headline PCE index increased 0.2% from the previous month. That was higher than the 0.1% increase economists had expected. On a yearly basis, PCE inflation reached 3.7%, also above the 3.6% forecast. The latest figure was unchanged from June but lower than the 4.1% recorded in May.
The core PCE reading, which leaves out food and energy prices because they can change sharply, was more in line with expectations. It rose 0.2% from June, while the yearly reading stayed at 3.3%. Even so, the headline inflation rate remained well above the Federal Reserve’s 2% target.
The hotter headline reading added to uncertainty over the path of U.S. interest rates. Treasury yields also moved higher after the release as investors assessed the possibility of rates remaining elevated for longer.
According to data from Coinglass, around $24.42 million was liquidated shortly after the report. $21.51 million from that amount came from traders who had bet on the price going up, while $2.91 million from that was from sell positions.
Crypto stocks prices drop amid the report
Bitcoin was not the only crypto-linked asset to come under pressure. Several crypto-related stocks also declined after the inflation report.
At the time of writing (on August 26 at 4:30 PM UTC), Coinbase (COIN) fell 3.38% to around $179.99 shortly after the report. Robinhood also declined 2.68% to around $109, while American Bitcoin (ABTC) fell 8% over the same period.
Bitmine, an ETH treasury company, declined 1.17% to around $24.53. MARA fell 4.69% to $11.27, while Circle (CRCL) declined 5.13%. Strategy fell 4.58% to around $87.30, according to data from Yahoo Finance (on August 26 at 4:30 PM UTC).
For crypto traders, the inflation report matters because interest rates can affect how willing investors are to put money into riskier assets such as Bitcoin and crypto stocks. With PCE still above the Fed’s target, the latest numbers have given markets another reason to watch the central bank’s next moves closely.
Also Read: Bitcoin Rally Gains Momentum as $2.23B ETF Inflows Fuel Recovery: Glassnode
