The US Consumer Price Index (CPI) numbers came out this morning, with the July CPI inflation rate falling to 2.9%, below expectations of 3%. Industry experts believe that a rate cut in September becomes more likely, and this could lead to a sustained rally for Bitcoin (BTC) to the $65,000 price level.

Meanwhile, the Core CPI inflation, which excludes food and energy, aligned with 3.2% expectations. Notably, this is the first month when CPI inflation has fallen below 3% since March 2021.

“Overall the disinflation trend, visible since Q2 this year, is intact. It is especially impacting the past drivers of strong inflation, namely Services, such as energy and shelter. ‘Supercore’ services inflation (the metric monitored and quoted many times by Fed Chair Powell) was 2% on a 3m3m SAAR basis in July, down from 3.9% in June and 6.2% in May,” Aurelie Barthere, Principal Research Analyst at Nansen, shared with Crypto Briefing.

Barthere added that this is a sharp deceleration, which leaves the Fed free to cut rates this year. Although future markets expect a 100 basis points (bps) cut by December, Nansen analysts are more keen on the idea of three 25bps cuts, or one single cut of 75bps this year.

Nevertheless, it all depends on real growth data showing no signs of sharp weakening.

“Inflation is no longer the main worry for the Fed or markets, real growth is now at the forefront. For equities and crypto to recover further, more good news around the US real economy, especially the consumer, are needed,” Barthere explained.

Positive impacts on Bitcoin

Moreover, Bitfinex analysts shared a note with Crypto Briefing where they believe a September rate cut would reinforce the bullish outlook for Bitcoin and other risk assets.

“This expectation of a rate cut could lead to a sustained rally in both the cryptocurrency market and related ETFs as investors seek to capitalize on a more accommodative monetary policy,” said the analysts.

Additionally, as inflation concerns ease, the market could see a surge in liquidity as investors anticipate lower interest rates. This generally makes speculative assets more attractive, Bitfinex analysts pointed out. 

As a result, the prospect of a rate cut becoming more tangible could propel Bitcoin to the range between $64,000 and $65,000, which is a key resistance level previously influenced by short-term whale activity.

“If the market perceives the CPI data as a green light for the Fed to cut rates, Bitcoin could break through this resistance, triggering a bullish trend. However, if whales begin selling as the price approaches this critical level, we might see some temporary selling pressure before any sustained breakout,” concluded Bitfinex analysts.