Bitcoin (BTC) has overturned its early losses during today’s session, and it is now gaining 1.1% in the past 24 hours after inflation in the United States stood in line with the market’s expectations.
In the past 12 months, prices increased by 3.4% according to data from the Bureau of Labor Statistics. This means that annual inflation stood at the same level in August as in July.
However, the monthly variation was 0.4% or 30 basis points higher than the market’s forecast for the period. Similarly, core inflation hit 0.3%, which is 10 basis points above last month’s print and higher than the consensus estimate by that same magnitude.
This is the most up-to-date report the Federal Reserve will see before they meet to decide on interest rates next week. Odds of a rate hike during this next meeting have now jumped from 68% to as much as 86%, according to data from FedWatch.
Meanwhile, analysts are now giving a 73% chance of another 25bp increase in December.
Bitcoin ETFs Have Bled Nearly $450M This Week
The crypto market is reacting positively to today’s inflation data, as prices started to rally right after the report came out.
Prior to the release of the report, exchange-traded funds (ETFs) linked to Bitcoin shed $448 million in assets after a three-day streak of net outflows.
As a result, monthly inflows are now standing at $321 million, meaning a projected total of around $900 million for September if the current trend continues. This would imply a 74% decline compared to the net inflows we saw last month.
However, the market’s reaction to today’s inflation report could change the token’s near-term outlook.
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See all Bitcoin forecastsCPI Bear Trap Could Push BTC to $85K as Short Squeeze Intensifies
Turning to the daily chart, the price just bounced off the lower bound of a flag pattern that we identified in previous Bitcoin price prediction articles.
This was the key support to watch and was temporarily broken during today’s session. The market may be taking advantage of today’s bearish report to trigger a short squeeze that reignites the top crypto’s rally.
This is commonly known as a bear trap, and liquidations indicate that it seems to be working. In the past 24 hours alone, $160 million worth of short positions have been wiped out.
A rate hike was already priced in by market participants, and today’s inflation report just confirmed what analysts already knew and expected.
If this short squeeze continues, the price could easily retest the upper bound of the flag at $80,000 during the weekend.
We need BTC to break past that ceiling to keep rallying to $85,000, which has been our short-term target for the token for a while. Meanwhile, the mid-term target for BTC continues to be $100,000.
The only thing that would change the direction of this prediction would be a break below the 200-day exponential moving average (EMA), as that would mean that bears are once again in control of the price action.
