Bitcoin Prints New ATH, Inflation Concerns Erase Gains
Bearish Divergence Flashes a Warning. Pullback Next?
After a false break of the $120K – $116K range, Bitcoin made a sharp reversal at $112K and broke the upper boundary, reaching an All-Time High (ATH) above $124K. The push was largely triggered by growing expectations that the Fed would loosen monetary policy at the September meeting. However, a flash crash followed, triggered by a higher than expected U.S. Producer Price Index (PPI).
A lower interest rate is usually beneficial to risk assets such as cryptocurrencies. Lower interest rates increase liquidity in the financial system, making it easier for investors to take riskier bets. Some of that extra liquidity often flows into crypto. Also, rate cuts can weaken the USD. Since Bitcoin and most cryptocurrencies are priced in USD, a weaker dollar can push up their prices.
At the time of writing, a rate cut in September is fully priced in, with a 95.8% probability of a 25 bps cut and the rest of 4.2% reserved for a half-point cut. President Trump has been critical of Fed Chair Powell’s unwillingness to cut the interest rate sooner, and it’s safe to assume that the new Fed Chair will be more open to quicker rate shifts. Jerome Powell’s term ends in May 2026, but President Trump has threatened to remove him sooner.
Crypto – The New Darling of Everyone
Tailwinds from institutional adoption and spot ETFs have also helped the crypto market lately. ETF inflows are back, and more corporations are establishing crypto treasuries. According to BitcoinTreasuries.net, currently 291 entities are holding Bitcoin, for a total of 3.65 million BTC. It’s a trend that’s likely to continue and to push the crypto market higher in the long run.
The Trump administration has been pro-crypto thus far, and this is not likely to change soon. President Trump recently signed an executive order aiming to remove regulations that prevent crypto assets from being included in 401(k) plans.
SEC Chair Paul Atkins clearly signaled the SEC’s new pro-crypto stance, promising innovation and a proactive regulatory approach. This is a major shift from the previous SEC approach during the Biden administration.
Chart Analysis – BTC/USD
The most recent breakout shows healthy volume and momentum, which is an indication that it’s a true break of resistance and not a fake-out. But the massive drop generated by the PPI may pose some challenges for the bulls.
The RSI is not overbought, which means there’s still room to move up, but there is a warning sign: bearish divergence. The price printed a higher high, but the RSI printed a lower high. Divergence often points to where the asset is headed — but not when it’ll get there.
If BTC starts a price correction soon, we may see another encounter with the previous range ($120K – $116K). A break below this range would suggest that a deeper correction is in the books.
