Bitcoin (BTC) and the greater cryptocurrency market have staged an impressive recovery following the August CPI remote, with nearly all major cryptocurrencies trading in positive territory.
Cryptocurrency markets remained relatively calm following the release of the August CPI report, followed by a steady rise. The August CPI data showed a slight increase in monthly inflation, although this was the lowest level so far in 2021. The core CPI, which excludes the food and energy sectors, rose 0.3% in August. The current forecast is leaning towards a 25 basis point rate cut, while the earlier forecast was for a 50 basis point cut.
Markets calm after August CPI data
The Bureau of Labor Statistics released the Consumer Price Index data on Wednesday, reporting that the cost of nearly all indexed items rose 2.5% over the past 12 months, before seasonal adjustments. The report also noted that the index for all items except food and energy rose 0.3% in August after rising 0.2% in July. Markets remained largely flat following the release of the CPI data. The Nasdaq rose nearly a full percentage point, while the S&P 500 rose slightly. The Dow and Russell 2000, on the other hand, fell slightly.
BTC also remained stable but fell after the Trump-Harris debate. The drop caused BTC to fall below $56,000, but it quickly recovered and is currently trading at over $58,000. Driven by BTC, other cryptocurrencies have followed a similar trajectory. Glassnode data also sheds light on Bitcoin miners, who remain resilient despite declining revenue. BTC's mining hash rate is approaching all-time highs, with the hash required to mine a block currently at 338k exahash, the second-highest difficulty in BTC history.
Bitcoin (BTC) Drops After Trump-Harris Debate
Bitcoin prices fell following a notable shift in betting market sentiment following the debate between U.S. presidential candidates Kamala Harris and Donald Trump. Harris’ odds of winning jumped to 56%, while Trump’s odds fell to 48%. As a result, Bitcoin prices fell below $56,000. Meanwhile, stocks and bond yields rose after a faster-than-expected inflation report, further corroborating speculation that the Federal Reserve will gradually begin to cut interest rates.
During the presidential debate, Harris remained calm as she hit back at Trump, while the former president became increasingly agitated as the debate progressed. Trump was also constantly interrupted by the moderator to fact-check his claims. The crypto market fell as neither candidate mentioned crypto during the debate. Trump has been a vocal supporter of crypto, promising to end what he called "Biden's war on crypto." On the other hand, Harris' stance on crypto remains unknown, which adds to the uncertainty of Harris' possible victory in the crypto market. Summarizing the debate, Quincy Krosby, chief global strategist at LPL Financials, said,
"Neither side has given a lot of details, and I think people who support Trump will believe he won the debate, and people who are loyal to the Democrats will think she won the debate."
Meanwhile, another analyst said neither report offered a strong economic view and instead created greater uncertainty for the market.
“Neither one made a strong economic case, but overall, Harris did a better job than Trump. I didn’t hear any soothing words from either candidate. If anything, I think they created more uncertainty. Markets don’t want strident rhetoric; they want clarity.”
Would a Harris Victory Cripple Cryptocurrency?
Some analysts attribute Bitcoin’s short-term success and price action to a potential Trump victory in November. Analysts at Bernstein predict that if Trump wins, Bitcoin prices could soar to $90,000 by the end of the year. Trump has repeatedly supported the cryptocurrency industry and promised to roll back anti-cryptocurrency legislation and regulation if elected, making the U.S. the cryptocurrency capital of the world. Harris’ stance on cryptocurrencies remains unknown, and analysts believe a Harris victory could drag Bitcoin prices to as low as $30,000.
Meanwhile, political action committees (PACs) have raised more than $200 million from major players in the cryptocurrency space and have spent nearly $95 million on the election. The largest cryptocurrency PAC, FairShake, has raised $177 million and spent more than $70 million during the 2024 election cycle, primarily in support of Democratic congressional candidates, according to OpenSecrets.
BTC decouples from gold as bear market persists
Bitcoin (BTC) has been in a bearish phase since August, decoupling from gold. While the world’s largest cryptocurrency continues to struggle, gold prices continue to hit new all-time highs. According to data from CryptoQuant, the correlation between BTC and gold has turned negative as BTC has fallen and is now 20% below its all-time high of $73,000 set in March. The market capitalization to realized value (MVRV) ratio has also been below its 365-day moving average since the last week of August, suggesting that a further pullback could be in the cards.
