Lower US Inflation Sparks Hopes for Bitcoin Rally, Says Grayscale Research Head

Lower US Inflation Sparks Hopes for Bitcoin Rally, Says Grayscale Research Head

Lower-than-expected core inflation in the United States could pave the way for Bitcoin to challenge its all-time highs, according to Zach Pandl, Grayscale’s head of research, who shared his insights with Cointelegraph on August 14.

The US Bureau of Labor Statistics (BLS) released July’s Consumer Price Index (CPI) data on the same day, revealing a 2.9% annualized increase in consumer prices—the slowest rate of inflation since 2021. Pandl highlighted the significance of this data, noting that it could provide the Federal Reserve with the flexibility to begin reducing interest rates.

“Rate cuts are likely a necessary condition for sustained weakness in the U.S. Dollar, and could serve as a catalyst for Bitcoin to retest its all-time highs,” Pandl explained. “Fortunately for crypto investors, the latest data may signal that rate reductions could happen sooner rather than later.”

The CPI results fell below market expectations, suggesting that the Federal Reserve might be able to proceed with anticipated interest rate cuts without significantly driving up consumer prices. However, concerns about a potential U.S. recession are growing, especially after the BLS reported on August 2 that unemployment had reached a three-year high of 4.3%.

Futures market pricing currently indicates expectations of at least a 0.25% interest rate cut at the Federal Reserve’s next meeting in September, as per CME FedWatch data. Presently, rates are targeted around 5.5%.

Despite the report, Bitcoin’s market reaction was unexpectedly subdued. Data from Cointelegraph Markets Pro and TradingView showed that BTC briefly surged to nearly $62,000 following the news, only to drop by more than 3% within the next hour.

The crypto markets have mostly rebounded from a sharp correction on August 5, during which Bitcoin’s price plummeted by approximately 18% in a single day.

Grayscale, the largest crypto asset manager, currently oversees more than $25 billion in assets across its various funds, according to the company.