Bitcoin Price Declines Despite Softer US Inflation Numbers — Rebound Next?

Bitcoin (BTCBTC) prices dipped during a volatile session on Aug. 14, following the release of United States Consumer Price Index (CPI) data for July. The data showed a rebound as expected, dampening hopes for a significant rate cut from the Federal Reserve.

Softer CPI Print Dashes Aggressive Rate Cut Bets

BTC’s price declined 4.75% to around $58,885, a move that started immediately after the U.S. Bureau of Labor Statistics reported a 0.2% increase in July inflation after falling 0.1% a month prior. Meanwhile, the CPI increased by 3.2% in July when compared to a year ago, its slowest gain since early 2021.

Bond traders now see a 43.5% probability of a 50 basis point (bps) interest rate cut in the Sep. 18 Fed meeting compared to 69% a week ago, according to CME data. Nonetheless, bets for a 25 bps rate cut have increased from 31% to 56.5% in the same period.

Lower interest rates typically lead to a growth in appetite for riskier assets, given they reduce the opportunity cost of holding safer alternatives like the U.S. Treasury notes due to their diminished returns.

For instance, the yield offered by the U.S. 10-year Treasury note declined by approximately 1.92% after the latest CPI print. This is theoretically bullish for a non-yielding asset like Bitcoin, but as of Aug. 14, the cryptocurrency appears to have been suffering a “sell-the-news” scenario, furthered by a reduction in the anticipation of a 50 bps rate cut.

Bitcoin On-Chain Outlook: BTC Holders, Whales Return Ahead of Potential Rate Cuts

Bitcoin is technically recovering from the 25% price decline it had witnessed during the Aug. 5 global market rout. The cryptocurrency has almost wiped out its losses entirely but needs further confirmation to continue rebounding in the coming session. A rate cut may do that.

On-chain data shows such optimism for Bitcoin.

For instance, since Bitcoin reached its all-time high in March, the market has experienced widespread selling involving wallets of all sizes. However, in recent weeks, there are early signs that this trend is reversing, especially among the largest wallets, often linked to ETFs, which are now beginning to accumulate Bitcoin again.

The 7-day change in Long-Term Holder (LTH) supply can be a valuable tool to assess shifts in their aggregate balance.

Notably, substantial LTH distribution occurred around the March all-time high, a pattern often associated with macro topping formations.

Fewer than 1.7% of trading days have ever recorded greater distribution pressure. However, this metric has returned to positive territory, suggesting that the LTH cohort favors holding onto their coins.

This shift from distribution to accumulation generally indicates growing confidence in the asset, which could reduce selling pressure in the market. As a result, this behavior could support Bitcoin prices or even lead to upward momentum, as fewer coins are sold and more are held for the long term.

Bitcoin Technical Analysis: BTC Pressured Below 50-3D EMA

From a technical viewpoint, Bitcoin appears to have been trading below its 50-3D exponential moving average (50-3D EMA; the red wave in the chart below), eyeing a breakout toward the upper trendline of its prevailing descending channel pattern.

Should a breakout above the 50-3D EMA occur, the BTC price will likely rise toward the upper trendline, which aligns with the 0786 Fibonacci retracement level of $66,900.

Conversely, a retreat from the red wave could crash the price toward the lower trendline at around $54,800, aligning with the 0.236 Fib line.