Bitcoin Drops Then Recovers as U.S. CPI Inflation Hits 2.9%

Key Insights:

• US CPI rose 2.9% in August, reinforcing expectations of a Federal Reserve interest rate cut.
• Bitcoin briefly fell below $114,000 after the CPI release before regaining momentum above key resistance.
• Analysts warn $114,000 remains a critical resistance level, with $111,000 identified as the next support zone.

The US Consumer Price Index rose 2.9% in August from a year earlier, according to the Labor Department. The figure was in line with expectations and followed a 2.7% increase in July. On a monthly basis, CPI rose 0.4%, just above the 0.3% estimate.

Core CPI, which excludes food and energy, advanced 3.1% year-on-year and 0.3% month-on-month. The steady reading adds weight to expectations that the Federal Reserve will cut interest rates at its meeting next week.

The Producer Price Index slowed to 2.6% year-on-year, far below the 3.3% forecast. The decline reflected weaker trade services margins and modest gains in goods costs. The softer PPI figure added to bets on upcoming Fed cuts.

Rate Cuts in Focus

Markets widely expect a 25-basis-point cut at the Fed’s meeting next Wednesday. The CME FedWatch tool also shows some traders are pricing in a chance of a 50-basis-point cut.

Together, the CPI and PPI readings strengthened market confidence that policy will soon ease. That outlook has boosted sentiment across equities and cryptocurrencies, which often benefit when interest rate expectations soften.

Bitcoin’s Reaction Around Key Levels

Bitcoin moved lower immediately after the CPI release, dropping to $113,823 before recovering above $114,000. Analysts pointed to $114,000 as the main resistance zone and $111,000 as first support.

Traders were advised to trim exposure ahead of the release, with the possibility of sharp swings around the data. Bitcoin’s brief dip has since been followed by an effort to reclaim and hold above $114,000.

The August inflation numbers give traders little room for certainty. A stronger CPI print often pressures risk assets, while softer figures tend to support them. With the Fed’s decision just days away, market participants are watching Bitcoin’s response at $114,000 to gauge momentum.

If Bitcoin holds above this level, it could clear the path toward higher liquidity zones. A failure to maintain support, however, could open the way for a retest of $111,000 or lower.