Bitcoin Whipsaws on CPI Day as Fed Hike Odds Skyrocket
The August CPI print had an unusual effect on Bitcoin's price. It initially dropped by around $500, but then surged back up by over four grand within a handful of hours before falling back down by almost three thousand dollars.
This whipsaw movement caught traders off guard, with both those leaning short and long getting liquidated before the dust settled.
The trigger for this price action was the inflation report released on Thursday. The annual CPI for August landed at 3.4 percent, which is in line with economists' forecasts. However, the monthly number of 0.4 percent ran hotter than expected, and core inflation crept up to 2.4 percent annually.
Funding rates had drifted negative ahead of the release, indicating that short positions were piling up, betting a hot print would wreck the market. But instead, price snapped higher, and those shorts got run over quickly.
The Federal Reserve's upcoming meeting on the 15th and 16th has traders on high alert, with odds of a quarter-point hike now at 87.3 percent, up from just 40.6 percent a month ago. A hike would be a tightening of policy, which could lead to less liquidity floating around risk assets, including Bitcoin.
The weekly chart still shows Bitcoin capped below its 50-week moving average, with resistance stacking above roughly $81,000 and support evaporating below about $72,000.