Bitcoin is bullish because rate cuts are coming: Bitfinex

Bitfinex analysts suggest that the latest Consumer Price Index (CPI) data is in line with expectations, strengthening the possibility of a Fed rate cut in September.

The U.S. economy appears to have finally gotten inflation under control, according to the latest CPI data released on August 14. The annual inflation rate fell to 2.9% in July, falling below 3% for the first time since early 2021.

Bitfinex analysts predict that markets will welcome this potential change in monetary policy, especially for riskier assets like Bitcoin (BTC). The expectation of lower interest rates could provide fresh liquidity, encouraging an uptrend in the cryptocurrency sector.

BREAKING: Great inflation report. Annual inflation fell to 2.9% in July – the first time it has fallen below 3% since the beginning of 2021.

Falling car prices and steady energy costs helped lower inflation. Monthly increase was 0.2% (as expected)

It looks even more like… pic.twitter.com/Guiz9HSOsf

— Heather Long (@byHeatherLong) August 14, 2024

Positive CPI data is expected to drive more inflows into Bitcoin and Ethereum (ETH) ETFs as investors take positions ahead of the expected rate cut.

At press time, Bitcoin was trading at $59,015.

Interest rate uncertainty

With Bitcoin potentially testing key resistance levels between $64,000 and $65,000, a rate cut could trigger a significant price rally, but analysts warn that short-term selling pressure from large investors, or “whales,” could temporarily cap gains before a sustained breakout occurs.

Analysts noted that if whales start selling as the price approaches this critical level, we could see temporary selling pressure before a permanent breakout.

Aurelie Barthere, Chief Research Analyst at Nansen, also agreed with this view, highlighting a significant slowdown in “super core” services inflation, one of the Fed’s key measures.

“Inflation is no longer the main concern for the Fed or markets, real growth is now in the spotlight. For stocks and cryptocurrencies to rally further, more good news from the US real economy, especially the consumer, is needed. Core US retail sales data this weekend will be a key data point that will shape the real growth narrative.”

Aurelie Barthere

That slowdown gives the central bank more flexibility to cut rates without stoking inflation fears. Barthere sees a potential 75 basis point cut by December 2024, but stresses that greater economic growth, particularly in consumer spending, is vital to a sustained market recovery.