Bitcoin News Today: Bitcoin's Fate May Hinge on Fed's Inflation Gambit

Bitcoin remained relatively flat on Wednesday as global equities continued to slide, amid mounting speculation over the U.S. Federal Reserve’s upcoming policy direction. Investors were closely monitoring signals from Fed Chair Jerome Powell, who is set to speak at the Jackson Hole symposium. Bitcoin briefly dipped to $112,565, a two-week low, as concerns over delayed interest rate cuts and broader macroeconomic uncertainty weighed on the cryptocurrency market [1]. Analysts noted that the dip highlighted growing nerves among traders, with liquidity and market sentiment seen as key determinants for a potential rebound.

The U.S. economy faces mounting inflationary pressures, with the latest Consumer Price Index (CPI) data showing year-over-year price increases of 2.7%, well above the Fed’s 2% target [1]. This report triggered a sharp decline in market expectations for a rate cut in September, with probabilities falling from 94% to 82% within a week, according to the CME Group’s FedWatch tool. The uncertainty over the timing of the first rate cut of 2025 has become a critical variable for asset prices, with many experts anticipating a multi-cut cycle before year-end [1].

Bitcoin’s performance could be significantly influenced by the Fed’s response to inflation and political pressures from U.S. President Donald Trump, who has called for cuts of up to 300 basis points. If the Fed complies, it could lead to a rapid rise in inflation and a weaker dollar, both of which are historically favorable for Bitcoin as an inflation hedge and store of value. A surge in inflation could push core PCE inflation beyond 4% by 2026, further eroding the dollar’s purchasing power and potentially sending the U.S. Dollar Index (DXY) below 90 [2].

Even in a scenario where the Fed resists early rate cuts, inflationary pressures remain embedded in the economy through Trump’s trade policies and the recently passed fiscal stimulus measures. Tariff increases and expansive fiscal policies are already contributing to higher input costs and inflation expectations. According to S&P Global, core inflation is expected to rise above the Fed’s target, despite the central bank maintaining its current policy stance [2]. These developments could still lead to a slower but steady erosion of the dollar’s value, making non-sovereign assets like Bitcoin increasingly appealing as a long-term value store.

Corporate adoption of Bitcoin has continued to grow, with over 297 public and private entities now holding the cryptocurrency, representing a significant portion of the total supply. This institutional accumulation is seen as a stabilizing force for Bitcoin’s price, even amid short-term volatility. Analysts have suggested that the first Fed rate cut in 2025 could serve as a catalyst for broader market optimism, particularly if it is followed by further reductions before year-end [1].

The Fed’s policy decisions and the broader macroeconomic environment will remain central to Bitcoin’s trajectory in the coming months. Whether through rapid rate cuts or a more measured approach, the U.S. economy appears locked into an inflationary path, with the dollar and long-term debt markets facing increasing strain. In either scenario, Bitcoin is positioned to benefit as a non-correlated asset with an increasing role as a hedge against systemic risk.

Source:

[1] Bitcoin Dips as Fed Powell Speech Looms (https://cointelegraph.com/news/bitcoin-dips-fed-powell-speech)

[2] All Roads Lead to Inflation: Fed Cut or Not, Bitcoin May Stand to Gain (https://cointelegraph.com/news/all-roads-lead-to-inflation-fed-cut-or-not-bitcoin-may-stand-to-gain)