Bitcoin Holds $78.5K as Markets Await Friday's Inflation Report
In brief
- Bitcoin trading at $78,524, down 0.72% but holding above its $73,986–$75,569 support zone
- S&P 500 at 7,689.80 within striking distance of its August 13 record close of 7,798.99
- Oil pushed toward $100 barrel on Strait of Hormuz tensions; markets price 57% odds of Fed rate hike
- Friday's inflation report and September 15–16 Fed meeting will set direction for risk assets
Oil Shock Lifts Rate Bets
Oil prices pushed toward $100 a barrel due to fresh U.S.-Iran hostilities in the Strait of Hormuz, a narrow waterway that ships roughly a fifth of the world's oil. Rising oil prices feed straight into inflation, since energy costs ripple through shipping and manufacturing. That's why markets have repriced their Fed expectations sharply. Markets are now pricing roughly a 57% chance the Federal Reserve raises interest rates a quarter of a percentage point at its September 15–16 meeting.
The broader equity selloff was real but contained. The Dow Jones Industrial Average fell 614.88 points, or 1.15%, to 52,799.37, while the Nasdaq Composite slipped 0.19% to 26,457.73. The S&P 500 opened at 7,717.81 and briefly dipped to its current level, yet the index remains within striking distance of its record close of 7,798.99, set August 13. HSBC raised its year-end S&P 500 target to 8,100, so conviction among strategists hasn't evaporated.
Bitcoin's Technical Setup
Bitcoin's pullback is less dramatic than the headline 0.72% drop suggests. Bitcoin opened Tuesday at $79,090 and slid as low as $77,603 before settling at $78,524, which follows a run from a $68,858 swing low to an $82,281 high. Bitcoin's golden zone, the band traders watch most, is between $73,986 and $75,569. Bitcoin is trading comfortably above it for now.
The momentum picture is mixed. The Relative Strength Index sits at 60.4, still bullish but down from 66.1 a week earlier. The Average Directional Index reads 47.2, well above the 25 mark that separates a real trend from noise. Yet the 50-day exponential moving average remains below the 200-day version, a bearish crossover that has held since before August's rally began.
There's a bullish counterpoint. Bitcoin closed August back above its 50-month moving average for the first time since crypto winter set in, and on Myriad, traders are pricing a 78.4% chance Bitcoin hits $84,000 before it falls to $55,000.
The Rate Hike Question
"An interest rate hike would be bearish for markets, risk assets like crypto in particular, because as lending gets more expensive, traders prefer safer assets over more volatile ones."
An interest rate hike would chill both equities and crypto. Friday's inflation data will be the real catalyst. Last Friday's jobs report showed U.S. employers added 162,000 positions in August, nearly triple the 53,000 economists had forecast, while the unemployment rate held steady at 4.1%. That strength, combined with rising oil prices, sets up a hawkish scenario heading into next week's Fed call.
Bitcoin's hot summer has come up against Red September once again. The coin is down close to another 1% after a monster 20% rally. What happens next could be decided by Friday's inflation print and the Fed's September 15–16 decision.
