Grayscale’s Head of Research, Zach Pandl, suggests the latest U.S. inflation data could present a temporary speed bump
for cryptocurrency markets. The August Consumer Price Index (CPI) report revealed hotter-than-expected headline inflation, increasing the probability of another Federal Reserve rate hike.
August CPI Details: Headline Heat, Core Cooling
The Bureau of Labor Statistics reported that headline CPI rose 0.4% month-over-month, while the annual rate held steady at 3.4%. However, the annual core inflation rate—which excludes volatile food and energy prices—eased to 2.4%. This figure aligns with economist forecasts and marks the lowest level since 2021.
Pandl: High-ish core CPI means decent chance of Fed rate hike
Reacting to the data on X (formerly Twitter), Pandl highlighted the mixed signals. High-ish core CPI means decent chance of Fed rate hike,” he wrote on X. “This is a ‘speed bump’ scenario for crypto.
Despite the heightened rate-hike expectations, Pandl does not anticipate a severe correction in digital assets. He argued that any near-term weakness would likely be limited, potentially offering a secondary entry point for investors who missed August’s rally. In my opinion, dips will be shallow and will create an opportunity for allocators that missed the August price jump,
the Grayscale executive said.
Market Probability Spikes; Economists Weigh In
Financial markets reacted swiftly to the report. Traders briefly priced in roughly an 85% probability of a rate hike, with Bianco Research founder Jim Bianco noting the probability climbed to about 90%. Economist Robin Brooks characterized the report as unfavorable for the central bank, arguing the stronger reading could push policymakers toward tightening.
Tighter monetary policy typically raises borrowing costs, a dynamic historically bearish for risk assets like Bitcoin (BTC).
Long-Term Disinflation Trend Intact
Several analysts emphasized that the broader disinflationary trajectory remains intact. The core CPI annual rate continues to march toward the Fed’s 2% target. Analyst James E. Thorne opined that the 2.4% annual reading serves as evidence that inflation remains on a longer-term downward trajectory. Geiger Capital similarly noted that core inflation has now reached its lowest level since 2021.
As of the latest data, Bitcoin is trading at approximately $78,772, according to CoinGecko.
