Bitcoin reclaims $80K as Fed rate-hike odds fall on Fed Governor's comments

Bitcoin BTC surged about 4% on Thursday to trade above $80,000, reclaiming the level for the first time since Aug. 28, as expectations for a September Federal Reserve rate hike eased following comments from Fed Governor Chris Waller.

According to CME FedWatch, the odds of a rate hike this month fell to 48% from nearly 70% a day earlier.

The shift came after Waller said he would favor keeping interest rates unchanged at the Fed’s upcoming meeting if next week’s August consumer price index (CPI) report shows continued progress in underlying inflation.

Waller puts focus on August CPI

Waller said he believes underlying inflation is performing better than headline core inflation figures suggest.

“My take is that underlying inflation is doing better than the core numbers suggest,” Waller said in a speech.

He also said he does not view elevated energy prices and tariffs as a significant source of persistent inflation pressure. “My earlier worry that higher energy prices would bleed into many goods and services prices hasn't come to pass,” he said.

Waller said he was not expecting significant information from the following day's employment report but was closely watching August CPI data.

If the report shows “continued progress” toward the Fed’s 2% inflation target, he said he would favor holding rates steady in September.

His comments nevertheless leave the possibility of a rate increase open if the inflation data fails to meet his expectations, leaving monetary policy dependent on upcoming economic data.

Bitcoin and gold correlation rises

Bitcoin has also been moving more closely with gold amid recent volatility in the bond market.

Data from Bitwise showed the 90-day correlation between the two assets reaching a nearly six-year high.

Bitwise Europe research director André Dragosch said Bitcoin gained 22.4% in the week following a rise in longer-dated US Treasury yields, while gold gained about 5% and stocks declined.

Dragosch said the last comparable Bitcoin-gold correlation reading occurred in 2020, during the COVID-19 crisis and the fiscal and monetary stimulus that followed.

Bitcoin was also negatively correlated with the US Dollar Index at the end of August, according to Bitwise.

Dragosch said that when macroeconomic forces become dominant, investors increasingly treat Bitcoin and gold similarly amid concerns about currency debasement.

Meanwhile, Glassnode analysts said Bitcoin’s 30-day correlation with the S&P 500 moved toward zero during August’s rally.

They noted that similar periods of decoupling during sovereign bond selloffs have historically been short-lived.

Bitcoin faces resistance near $83K-$86K

Bitcoin cleared $80,000 toward the end of August following a 25% monthly rally before retreating toward $76,000.

Glassnode identified a long-term holder supply cluster between $83,000 and $86,000, while its main accumulation floor was between $62,000 and $65,000.

At around $78,000, 68% of Bitcoin supply was in profit, compared with 65% when Bitcoin traded around the same level in May.

Spot Bitcoin ETFs were recording average daily inflows of $290 million at the height of the rally, while daily ETF trading volume remained near $3 billion.

Market analyst Erik Crown said Bitcoin could reach $90,000 by October if September proves positive.

Crown also pointed to historical periods of extreme investor apathy before major reversals and said Bitcoin’s historical returns after trading more than 50% below its previous high supported the possibility of further gains.