Fed Rate Hike Bets Rise: Bitcoin Struggles Below $80,000

The August Consumer Price Index (CPI) report released by the US Bureau of Labor Statistics showed that headline inflation matched expectations at 3.4% year over year, but core CPI increased 0.3% month over month, above forecasts.

This hotter-than-expected reading strengthened expectations for a Federal Reserve rate hike next week, creating another hurdle for Bitcoin. The cryptocurrency initially dropped to around $76,700 before recovering to $77,400, showing that traders are treating the hotter core reading as a potential Fed-policy risk rather than a major inflation shock.

The reaction also highlighted the market's focus on Treasury yields and interest-rate expectations, which rose sharply after the report. The two-year Treasury yield climbed to around 4.61%, while markets moved toward roughly 90% odds of a 25-basis-point Fed hike at the September 15-16 meeting.

Higher rates can weigh on Bitcoin by supporting Treasury yields and the dollar, reducing the relative appeal of riskier assets. With inflation still above the Fed's 2% target, the latest CPI report gives policymakers another reason to remain cautious about easing.