Altcoins Rebound as Rate Hike Bets Hit 90 Percent

The altcoin market experienced a rebound on Friday afternoon after the August Consumer Price Index (CPI) came in line with expectations, removing the risk of a hot inflation print that would have forced the Federal Reserve's hand and triggered selling.

While this news may seem positive at first glance, it also pushed the probability of a September 16 rate hike to about 90 percent, according to CME Group's FedWatch tool. This is because core CPI, which strips out food and energy, rose 0.3 percent on the month against a 0.2 percent forecast.

The energy index was responsible for most of the increase, with gasoline jumping 3.9 percent and accounting for more than a third of the monthly rise. The broader energy index rose 16.3 percent over the year due to Middle East tensions and oil prices above $100.

Bitcoin remains near the bottom of its range, with open interest across exchanges at roughly $53B, about 14 percent higher than a month ago. This indicates heavy leverage in the system, rather than washed out positions. A chunk of that positioning is short, clustered around the $78K area, and funding rates have compressed toward neutral.

A move into the $76K zone at the base of the range would flip negative funding rates, which means shorts pay longs to hold their positions. This could load the market with fuel for a squeeze if buyers force those shorts to cover.