Low CPI print is fodder for Bitcoin to retest all-time highs — Grayscale research head

Bitcoin’s response to the CPI report was surprisingly muted.

Lower-than-expected core inflation in the United States is fodder for Bitcoin (BTC) to retest its all-time highs, Zach Pandl, Grayscale’s head of research, told Cointelegraph on Aug. 14. 

The US Bureau of Labor Statistics (BLS) reported July Consumer Price Index (CPI) data on Aug. 14 showing annualized price increases for consumers of 2.9% — the slowest rate since 2021. That is “significant because it will allow the Fed to begin reducing rates,” Pandl said.

“Rate cuts are likely a necessary condition for sustained weakness in the US Dollar and fodder for Bitcoin to retest its all-time highs,” according to Pandl. “Fortunately for crypto investors, the incoming data may be a signal for lowering rates sooner rather than later.”

Related: BTC price suddenly drops 5% as Bitcoin rejects low CPI print

The results came in below market expectations, suggesting that the US Federal Reserve can proceed with anticipated cuts in interest rates without fear of unduly impacting prices for consumers. Fears that the US is heading towards a recession are mounting after the BLS reported unemployment at a 3-year high of 4.3% on Aug. 2.

Futures market pricing currently reflects expectations of at least a quarter of a percent interest rate cut at the Federal Reserve’s next meeting in September, according to CME FedWatch. Rates are currently targeted at around 5.5%.

Bitcoin’s response to the report was surprisingly muted. According to data from Cointelegraph Markets Pro and TradingView, BTC spiked to nearly $62,000 on the news and then fell by more than 3% in the following hour.

Crypto markets have largely recovered from a sharp pullback on Aug. 5 that saw the price of BTC plunge by around 18% in a day.

Grayscale is the largest crypto asset manager with upwards of $25 billion in assets under management (AUM) across its funds, according to the company.