On Thursday (September 12), Bitcoin broke through $58,000, and the Federal Reserve's pricing for a 25 basis point rate cut next week boosted cryptocurrency buying. But BlackRock, a $10 trillion asset management giant, warned that the Fed would not cut interest rates as much as expected. Former US President Donald Trump unexpectedly reversed his odds to lose to Vice President Harris after the televised debate. Analysts say Bitcoin's short-term rise may be a "bull trap."

“We believe there are a number of factors driving market volatility, including renewed recession fears due to some weak economic data, pre-U.S. election jitters, and profit-taking as investors make room for new offerings,” BlackRock Investment Institute strategists led by Jean Boivin wrote in a note.

“We believe the Fed will not cut policy rates as aggressively as the market expects,” they added.

The annual rate of inflation of the U.S. Consumer Price Index (CPI) fell to 2.5% in August from 2.9% in July, the lowest level since April 2018. In August, the core CPI annual rate, which excludes volatile food and energy prices, remained unchanged at 3.2%, in line with expectations.

Monthly CPI rose 0.2% and core CPI rose 0.3%, the largest increase in four months, both of which were higher than market expectations. Neil Birrell, chief investment officer of Premier Miton Investors, also believes that the possibility of the Fed cutting interest rates by 50 basis points next week has been hit hard by this report, but it is not enough to prevent the bank from cutting interest rates.

The market generally expects the Federal Reserve to cut interest rates when it holds a two-day policy meeting on September 17. This will be the first rate cut by the Fed since the outbreak of the epidemic and may herald a new cycle of lower borrowing costs and increased liquidity.

Last week, the U.S. August non-farm payrolls report showed 142,000 new jobs, lower than market expectations, triggering a plunge in Bitcoin prices. The slowdown in the job market has heightened concerns that the Federal Reserve waited too long to cut interest rates and could cause the economy to fall into recession.

“We believe that even if inflation is declining toward the Fed’s target in the short term, rising inflation over the medium term will limit the extent to which the Fed can cut rates,” Boivin wrote. “Growth concerns and cooling inflation have pushed the 10-year Treasury yield to a 15-month low as investors already price in more than 100 basis points of rate cuts by year-end and about 240 basis points of rate cuts over the next 12 months, implying that the Fed will respond to a recession.”

In the US election, Trump seemed to be at a disadvantage after Wednesday's presidential debate. According to data from Polymarket, a large cryptocurrency betting platform, Harris's chances of winning in November rose to 50%, while Trump's chances fell to 49%, an unexpected reversal. The two did not mention cryptocurrency at all during the debate.

Analysts at asset management giant Bernstein warned that if Harris wins the US presidential election in November, the price of Bitcoin could plummet by nearly 50% to around $30,000.

However, a Trump victory could mean a surge in Bitcoin prices to $90,000 due to Trump’s recent embrace of cryptocurrency.

“The market assessed that Harris had won the debate, especially in the early stages, and that led to a small drop in cryptocurrency prices,” Caroline Mauron, co-founder of Orbit Markets, a provider of liquidity for digital asset derivatives trading, told Bloomberg.

Bitcoin Technical Analysis

Despite the changes brought by the CPI data, it has not yet had a significant impact on Bitcoin as it has remained stable at $57,000 over the past few hours. Therefore, the Federal Open Market Committee (FOMC) meeting scheduled for September 18 may be crucial for the future of the cryptocurrency market.

Glassnode's weekly report shows that despite the decline in revenue, Bitcoin miners are showing resilience in their mining activities. Bitcoin's mining hash rate is approaching its all-time high, just 1% behind. The number of hashes required to mine a block is currently 338k exahash, which the report notes is the second-highest difficulty in the asset's history.

However, traders have not shown similar conviction, as Bitcoin trading volumes have been steadily declining since July. Notably, exchange spot volumes have declined over the past 90 days, lending further credence to the view that trading activity has clearly declined over the last quarter.

In addition, the CVD indicator, which measures the net balance of buying and selling in the spot market, shows that investors' selling pressure has increased over the past 90 days.

CoinChapter said that a key focus of Bitcoin prices is the behavior of whales, especially those who hold 100,000 to 1 million Bitcoins (red line).

Historically, their inactivity has often preceded periods of stagnant or falling prices, as they play a crucial role in driving major price trends.

In addition, more worrying is the massive selling by medium-sized whales (pink part is 10,000 to 100,000 bitcoins), who have been steadily reducing their holdings. Such investors are often regarded as major market influencers due to their large holdings, but they have shown clear signs of exiting the market.

Their continued selling signals growing pessimism about the cryptocurrency’s short-term prospects. Such selling, combined with broader risk aversion, typically leads to long-term price declines as liquidity leaves the market and demand from major holders weakens.

In addition, CoinShares data also confirmed the bearish sentiment. Bitcoin's weekly outflow of $643 million indicates that institutional investors may have lost confidence in its short-term prospects. The inflow of funds into short-term Bitcoin products ($3.9 million) is insignificant compared to the outflow, highlighting the negative bias of the market.

The growing influx of funds into bets on a rebound in Bitcoin prices suggests that bearish sentiment is building and investors are positioning themselves for further declines.

Furthermore, while smaller retail investors (100 to 1,000 Bitcoins in yellow) have increased their holdings, this has generally not been able to offset the selling by larger investors. Retail investors lack the financial resources to fight against whale liquidations and are therefore unlikely to prevent prices from falling.

Bitcoin has formed a bearish pattern known as a “descending triangle,” which analysts view as a bearish continuation pattern characterized by a descending upper trendline that compresses price action into lower highs, while a flat lower trendline provides weak support.

This setup intensifies selling pressure as the rally struggles to break through the resistance, causing buyers’ willingness to buy to taper off. The battle between the bulls and bears usually ends with a break below the lower trendline.

Traders estimate potential downside by measuring the vertical distance from the highest point of the triangle to the flat support line and projecting that distance downward from the breakout point.

Recently, the price of Bitcoin fell below the pattern, which briefly signaled a bearish breakout. However, bulls have managed to push the price back inside the pattern, increasing the possibility of a bull trap. If Bitcoin confirms the pattern, the coin could fall by more than 31%, with a target close to $39,370.