Bitcoin Faces Pressure from Rising Yields and Oil Ahead of U.S. Inflation Report

Bitcoin Dips as Treasury Yields Climb Near 5%

The price of bitcoin has fallen over the past 24 hours, trading near $77,000. This decline comes as the 10-year U.S. Treasury yield sits around 4.94% and the Dollar Index is near 99.15. The drop is tied to concerns ahead of today's U.S. inflation report.

The August consumer price index (CPI) report, which measures changes in consumer prices, is due at 8:30 a.m. ET. It will be a key factor for financial markets, including bitcoin, before the Federal Reserve's next interest-rate decision next week.

Key Market Drivers and Forecasts

• Bitcoin is down in the last 24 hours, with government bond yields rising.
• High oil prices, with Brent crude reaching $109 a barrel, are adding to inflation challenges.
• Economists expect core consumer prices, which exclude food and energy, to have risen by 0.2% from July.
• There is about a two-thirds probability of a Fed rate increase next week, according to trading firm QCP, which aligns with prediction market odds of 61%.

QCP Trading Firm Highlights Risks for Bitcoin

Trading firm QCP stated in a market update that the current environment is challenging for bitcoin. The firm said: "This is the worst mix for Bitcoin: a competing 5% risk-free rate without the nominal-growth impulse that usually accompanies yield moves."

This means investors can earn a safer 5% return from government bonds, which reduces the appeal of riskier assets like bitcoin when economic growth isn't strong enough to compensate.

CPI Report Could Shift Fed Rate Expectations

The CPI report is critical. If inflation comes in softer than expected, it might lower expectations for a Fed rate hike, potentially giving bitcoin room to recover. However, if inflation is higher than forecast, it could push yields up further and pressure bitcoin.

Data from other sources, such as Barron's and Polymarket, provide context on market expectations for the Fed's decision.

Weekend Liquidity Could Amplify Price Movements

The weekend may amplify any market moves after the CPI report. Trading in spot bitcoin ETFs, which are funds that track bitcoin's price, will pause until Monday when U.S. markets close. This thin liquidity could leave crypto markets exposed to headlines over the weekend.

Technical Indicators Show Key Support Levels

From a technical perspective, bitcoin's price is nearing its 50-week exponential moving average of $77,374. It recently failed to break above a Fibonacci resistance level. A weekly close below this 50-week average could signal weakening momentum and lead to a drop toward $70,000.

Sources

• CoinDesk