Market eyes Fed rate cut signals amid inflation concerns
Bitcoin (BTC) dropped below $113,000 on Wednesday, touching a two-week low of $112,565, as investors positioned themselves ahead of Federal Reserve Chair Jerome Powell’s speech at the annual Jackson Hole symposium. Traders see Powell’s remarks as a crucial signal for the U.S. central bank’s next steps on interest rate cuts.
Analysts say the move reflects “rising nerves in the market” as macroeconomic uncertainty weighs on sentiment. Ryan Lee, chief analyst at Bitget, noted that Powell’s comments could reset market expectations in the short term.
“Now, letting the narratives settle and liquidity return might pave the way for a rebound. If the $112,000 support level holds until the speech, it may provide the setup for the next leg of the bull run rather than a reset,” Lee said.
The backdrop includes renewed concern about inflation. The U.S. Consumer Price Index (CPI) showed a 2.7% year-over-year increase in July, unchanged from June but still well above the Fed’s 2% target.
Rate Cut Expectations Shift
Following the CPI release, traders reduced expectations for a September rate cut. According to CME Group’s FedWatch tool, the probability of a cut fell to 82%, down from over 94% a week earlier.
“The moment you see further rate cuts by the Fed, the curve will steepen, which implies even more acceleration and U.S. money supply growth,” said André Dragosch, head of European research at Bitwise. He added that cuts could become the most significant macro factor supporting Bitcoin’s rally through the end of the year.
Institutional Accumulation Continues
Despite volatility, corporations and institutions continue accumulating Bitcoin. Data shows more than 297 public entities now hold BTC, up from 124 at the start of June. Collectively, these firms, funds, and even governments control around 3.67 million BTC, representing over 17% of total supply.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.