Bitcoin Consolidates as Inflation Data Dims Rate Cut Hopes

Bitcoin (BTC) has been experiencing a period of consolidation, with its price holding within a descending channel. This range-bound movement is indicative of a market that is currently lacking the momentum needed to break higher. The onchain activity for Bitcoin has been relatively weak, suggesting that there is a subdued level of user participation and profitability metrics are fading. This consolidation phase is likely a result of the market digesting recent gains and waiting for a renewed surge in demand to fuel the next leg higher.

From a technical perspective, Bitcoin's failure to sweep external liquidity near $109,000 has led to a gradual decline on the 4-hour chart. The current price action remains confined within a descending channel, with a key area of interest between $103,400 and $104,600. This zone aligns with a daily fair value gap (FVG) and is supported by the 200-day exponential moving average (EMA), raising the potential for a bounce. Considering BTC collects internal liquidity within this range, a bullish breakout above the descending channel to new highs remains a plausible scenario. However, until momentum builds and onchain activity revives, the broader market structure could likely stay in consolidation mode.

Bitcoin faces additional headwinds as core inflation data rose to 2.7%, indicating renewed inflationary pressure. This increase in core inflation, along with sticky price growth, reduces the likelihood of Federal Reserve rate cuts, maintaining pressure on Bitcoin and other risk assets. The latest Personal Consumption Expenditures (PCE) inflation data, the Fed’s preferred metric, rose to 2.3%, which is in line with expectations, while Core PCE climbed to 2.7%, slightly above the projected 2.6%. This marks the first uptick since February 2025, suggesting that the Fed is likely to maintain its rate pause, keeping financial conditions tight and unfavorable for risk assets like Bitcoin.

Glassnode data further supports the cautious outlook, showing a minor $7.7 billion increase in spot volume during Q2. Transfer volume dropped 36% earlier in the quarter, highlighting a lack of speculative urgency. This data suggests that the market is in a reset phase, with a temporary clearing of speculative leverage. The market appears to be digesting recent gains, likely waiting for a renewed surge in demand to fuel the next leg higher. Until momentum builds and onchain activity revives, the broader market structure could likely stay in consolidation mode.