US Core PCE within market expectations in July, Bitcoin price likely to begin recovery
- US Core Personal Consumption Expenditures Price Index rose 0.2% MoM and 4.2% YoY in July.
- The Federal Reserve Chair has hinted at future interest rate hikes in his speech at the Jackson Hole Symposium.
- Bitcoin price is likely to recover in light of the PCE inflation data.
The Federal Reserve’s preferred measure of inflation, Core PCE, excludes food and energy prices that are influenced by global factors. Core PCE rose 4.2% YoY in July, according to the US Bureau of Economic Analysis report on Thursday.
The Core PCE reading is within market expectations and below Fed Chair Powell’s preliminary estimate of 4.3% for July.
Also read: Breaking: US Core PCE inflation rises to 4.2% as anticipated
What Core PCE Price Index reading for July means for Bitcoin price
The Core PCE Price Index reading for July was in line with the market expectation, rising 4.2% over the 12 months to July. While this is a slightly stronger pace than the 4.1% increase recorded in June, risk assets like Bitcoin benefit from the possibility that inflation is cooling down in the US.
Fed Chairman Jerome Powell had reiterated in his recent speech at Jackson Hole that officials watch Core PCE more closely, for an outlook on US inflation and offered a preliminary estimate of 4.3% for July’s Core PCE rate. The actual reading came 0.1% below the estimate, in line with the expectations of economists.
Economists surveyed by FactSet – a research system that provides inputs to Wall Street professionals – had predicted the Core Annual PCE inflation rate to bump up to 4.2%, signaling that inflation is likely cooling down after a year of interest rate hikes.
Moreover, this reduces the likelihood of an interest rate hike in September, easing the selling pressure on risk assets like Bitcoin and altcoins.
Bitcoin is likely to begin its recovery and eye resistance at the $28,000 level, in light of the recent data release. In the event of an interest rate hike in September, BTC’s recovery rally to the August monthly high above the key $30,000 level could be jeopardized.
BTC/USDT five minute price chart on Binance
Bitcoin price is currently influenced by other factors, like SEC’s appeal against Grayscale’s win in the lawsuit and macroeconomic releases like Nonfarm Payrolls for July. It remains to be seen whether BTC price yields gains for holders or retraces to test support at the $27,000 level.
Bitcoin, altcoins, stablecoins FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
What are altcoins?
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are stablecoins?
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio of Bitcoin's market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
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Author
Ekta Mourya
FXStreet
Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.
