July’s consumer inflation cooled to 3.4% on August 12, and producer prices came in unchanged the next day against the 0.2% rise economists expected. Cooling inflation gives the Federal Reserve room to stop raising rates, and cheaper money is what usually sends the Bitcoin price higher.
However, Bitcoin (CRYPTO:BTC) fell on both prints, dropping from an intraday high of $65,234 to $63,304 after the consumer numbers, while the Nasdaq and S&P 500 both climbed on the same news. So why is Bitcoin dropping when the news is finally going its way?
How Far Bitcoin Has Fallen This Year
Bitcoin is worth roughly $1.28 trillion today, about half what it was worth at its $126,000 record last October, and the Bitcoin price is well below the $119,400 it traded at this time last year.
At the start of January, Bitcoin traded at $88,764. It fell 34% over the next six months and closed June at $58,566, its lowest in 21 months. A Federal Reserve that kept talking about raising rates did most of that damage, while $4 billion left the spot Bitcoin ETFs in June, which was their worst month on record.
Between 45% and 46% of all Bitcoin is now worth less than what its buyers paid, which is roughly 9 million coins. Anyone who bought in the last six months paid $68,700 on average, according to Glassnode, so they are down 7.2% and they sell whenever the price climbs back toward what they paid. That is why Bitcoin has been stuck between $58,000 and $68,000 since June.
The BTC price has dropped below every moving average traders watch, including the 200-day near $71,900, over seven months. Perpetual futures trading has since fallen to a three-year low, and the Fear and Greed Index reads 29, which shows the market is in fear.
Why Soft Inflation Data Didn’t Help Bitcoin
Consumer prices rose 3.4% in the year to July, down from 3.5% in June, with core inflation easing to 2.5%. Producer prices then came in unchanged for the month against an expected 0.2% rise, and the annual figure dropped to 4.7% from 5.5%. Producer prices are what factories and suppliers charge, so flat readings there usually mean consumer prices follow, and both together should have lifted the Bitcoin price.
However, Bitcoin barely reacted. It had already fallen from an intraday high of $65,234 to $63,304 after the consumer print, and the producer numbers the next day did nothing to stop it.
According to Glassnode, a weak response to good news is also a warning. Buyers waiting on the sidelines buy when the reason they were waiting for arrives, so a market that stays flat on good data is short of buyers rather than short of reasons.
Moreover, traders have cut the odds of a September rate hike to 32%, down from above 75% a month ago. They now put the chance of a pause at 63% after payrolls shrank by 23,000 in July. So the short-term pressure has eased, but the odds of tighter policy by year-end are still near 70%, which means the market…
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