Lower inflation sounds bullish for Bitcoin.
But it’s not that simple.
Here’s why:
Lower inflation
↓
Less pressure on the Fed
↓
Lower rate-hike expectations
↓
Potentially lower yields
↓
Better conditions for risk assets
↓
Bitcoin
That’s the theory.
But markets don’t trade on one number.
Bitcoin still reacts to:
• Treasury yields
• The U.S. dollar
• Liquidity
• ETF flows
• Investor positioning
• Expectations for future Fed policy
Today’s softer PCE data helped reduce expectations for an October rate hike.
But inflation is still above the Fed’s 2% target.
So the real question isn’t:
Is inflation going down?
It’s:
What does this data change about future monetary policy?
That’s the part worth watching.
Don’t just watch the Bitcoin chart.