CPI ignites interest rate hike expectations! The crypto market experiences a double kill for both bulls and bears, with nearly 100,000 people liquidated

Author: Zhou, ChainCatcher

The U.S. Bureau of Labor Statistics released the August CPI on Friday, showing an overall price increase of 3.4% year-on-year and a 0.4% increase month-on-month, both in line with market expectations. The core CPI, excluding food and energy, slowed to 2.4% year-on-year, the lowest since March 2021, but rose 0.3% month-on-month, higher than the expected 0.2%. Gasoline prices increased by 3.9% month-on-month, contributing to more than one-third of the overall monthly increase, while the energy index rose by 2.1% month-on-month.

In the stock market, prior to the data release, the Asia-Pacific markets fell across the board, with the Nikkei 225 index closing down 1.93%, the Korean KOSPI index down 1.76%, and the four major A-share indices opening lower and closing down. After the data was released, U.S. stocks opened higher but then fell back, ultimately closing up, with the S&P 500 index rising by 0.9%, and both the Dow and Nasdaq rising about 1%, although all three indices still experienced a decline for the week.

Additionally, the 10-year U.S. Treasury yield closed at 4.974%, nearing the 5% mark, up from 4.783% a week ago. Brent crude oil closed at $104.61 per barrel that day, with a cumulative increase of over 8% for the week, driven by factors such as Houthi attacks on Saudi energy facilities and transportation risks in the Strait of Hormuz.

The cryptocurrency market exhibited a pattern of initial decline followed by a rebound and then a pullback. Bitcoin briefly dipped to around $76,000 after the data was released, then reached a high of $79,837, with the 50-day moving average briefly crossing above the 200-day moving average. However, as interest rate hike expectations quickly intensified, the price fell back, and the golden cross was invalidated on the same day. Ethereum briefly returned above $2,600 during the day, showing stronger resilience than Bitcoin.

According to Coinglass data, as of the time of writing, liquidations across the entire network reached $674 million within 24 hours, affecting approximately 94,000 people. Ethereum led with $311 million in liquidations, while Bitcoin had $184 million, with the largest single liquidation occurring in Hyperliquid's ETH-USD position, amounting to about $20.28 million.

Interest Rate Hike Probability Rises to 80%, Fed's Decision Next Week Still Uncertain

For the Federal Reserve, the weight of the August CPI data was elevated even before its release. Analysts at Bank of America previously stated that the August non-farm payrolls were more like an appetizer, with the main course that would truly determine the direction of the September 15-16 meeting being the CPI. They believe that unless there is a significant downside surprise in employment data, non-farm payrolls are unlikely to be the final deciding factor for whether to raise interest rates, maintaining their judgment for a rate hike in September. The subsequently released August non-farm payrolls added 162,000 jobs, about three times the expectation, which has already pushed the discussion of rate hikes forward.

After the CPI data was released, the market's attitude towards next week's Federal Reserve meeting clearly shifted to a hawkish stance. The latest data from Polymarket shows that the market is betting on an 80% probability that the Federal Reserve will raise rates by 25 basis points on September 16, with a 21% probability of maintaining the current rate, about a 1% probability of raising by more than 50 basis points, and probabilities for rate cuts all below 1%. Before the CPI was released, maintaining the current rate had been the highest probability option for quite some time, only to be quickly overtaken by the rate hike option around the time of the data release.

CICC Research pointed out that the August CPI has already reached the Federal Reserve's rate hike threshold, expecting a 25 basis point increase on September 16, and possibly lowering the unemployment rate forecast while raising the inflation forecast, signaling tightening. Financial blog Zero Hedge emphasized that the core CPI is hot, with super core inflation even hotter, as prices for education and communication services have seen historic increases, including a record surge in mobile communication service prices.

Goldman Sachs economist Alexandra Wilson-Elizondo stated that the CPI on that day superficially met the results investors wanted to see, yet raised the suspense for next week's interest rate decision. She believes that the data does not fully reflect some of the recent inflation pressures and there is almost no evidence of inflation returning to target in the short term.

Energy remains an exogenous variable in this logic. Houthi attacks on Saudi energy facilities, transportation risks in the Strait of Hormuz, and Saudi Arabia's closure of east-west oil pipelines continue to heighten supply concerns. The coexistence of high oil prices and high interest rates has also led Wall Street to reframe the question to how long high rates will last and whether policies can contain inflation without significantly harming the economy and corporate profits.

RBC Capital Markets has adjusted its path for this year from previous expectations of rate cuts to three rate hikes, believing that high rates may further suppress corporate profits and stock valuations. Federal Reserve mouthpiece Nick Timiraos recently wrote that investors have basically concluded that the Federal Reserve will raise rates for the first time in three years next week, with the more difficult question being what happens afterward.

Almost no one within the Federal Reserve believes that a single 25 basis point hike will be sufficient to lower inflation. If a rate hike is chosen next week, most investors will interpret it as a correction of the previous rate level itself, with the hike being more like the beginning of a correction, making it unlikely to be a one-time event. Since the 1990s, the Federal Reserve has rarely stopped after just one hike.

In July, Waller stated that he does not believe the Federal Reserve is good at fine-tuning, leading analysts to conclude that a chairperson skeptical of fine-tuning is unlikely to declare the mission accomplished after a 25 basis point hike. The market currently expects that by June next year, the cumulative number of rate hikes will reach at least three, higher than the previous expectation of two.

For risk assets, Friday's rebound mainly stemmed from a clearer policy path, while inflation pressures themselves have not truly been alleviated. The decrease in policy uncertainty can explain why U.S. stocks were still able to close up after interest rate hike expectations intensified. The real pricing moment remains in the decision, dot plot, and Waller's press conference on September 16.

Bitcoin's Golden Cross One-Day Wonder, $82,000 Resistance Emerges

The cryptocurrency market reacted more violently to this data. In the four hours following the CPI release, Bitcoin first dipped to $76,000, then rebounded to break through $79,000, before falling back to around $77,600. According to Coinglass data, during these four hours, liquidations across the entire network reached $471 million, with $348 million in short liquidations and $123 million in long liquidations, representing a typical double kill of longs and shorts.

Notable trader Killa published statistics indicating that after the last three U.S. CPI releases, Bitcoin rose over 5% within eight days. He believes the current market has priced in negative news, and the bear market trap has been set.

Looking at a longer time frame, the cryptocurrency market has seen significant volatility recently. According to Coinglass data, Bitcoin rose 24.95% in August, the best single month performance of the year, but momentum weakened entering September, with a decline of 1.83% within the month.

In terms of capital flow, there has been a divergence between Bitcoin and Ethereum spot ETFs. According to SoSoValue data, Bitcoin spot ETFs saw a net outflow of $463 million that week, with net assets of about $97.58 billion, corresponding to a Bitcoin price of about $77,286; Ethereum spot ETFs saw a net inflow of $197 million during the same period, with net assets of about $16.31 billion, corresponding to a price of about $2,539.

Regarding publicly listed treasury companies, according to SoSoValue data, as of September 8, Eastern Time, the scale of global publicly listed companies increasing their Bitcoin holdings has significantly slowed, with a total net purchase of $267 million excluding mining companies, a decrease of 48% from the previous week. The total holdings of publicly listed companies amounted to 1,119,973 Bitcoins, a decrease of 2.38% from the previous week, with a market value of about $87.77 billion, accounting for 5.6% of Bitcoin's circulating market value.

Among them, Strategy's last increase occurred on August 31, purchasing 4,600 Bitcoins, bringing their total holdings to 845,050 Bitcoins, currently showing a slight profit. According to Strategy's latest 8-K filing, the company has raised approximately $20.9 billion this year, ranking fourth in the scale of U.S. stock issuances, behind only SpaceX, Alphabet, and Intel. In contrast, Ethereum treasury company Bitmine continues to increase its holdings against the trend, adding 28,086 Ethereum last week, bringing total holdings to 5,929,200 Ethereum, with an average cost of $3,347, currently showing a floating loss of about $5 billion.

From a technical perspective, on September 12, Bitcoin briefly rose to $79,837, with the daily 50-day moving average briefly crossing above the 200-day moving average, before the price fell back, and the golden cross subsequently disappeared. This is the first daily golden cross for Bitcoin since November 2025 and also the fastest invalidation, with short-term momentum cooling simultaneously. Similar golden crosses in February 2021, October 2023, and May 2025 were followed by a period of pullback, indicating that the golden cross is more of a lagging signal, with a significant portion of the gains often already realized by the time it appears.

In terms of on-chain chips, analyst Murphy pointed out that short-term holders' chips are mainly distributed in the $59,000 to $81,000 range. If it breaks above $82,000, it means that this portion of holdings will all enter profit, creating a motivation for short-term funds to cash out. The peak of chips concentrated among long-term holders also falls in the $81,000 to $82,000 range, including chips that have been passively held after being trapped, making it easier to exit when the price approaches the cost. The group of whales holding over 100,000 coins, besides having two concentrations around $40,000, is also stacked in the $78,000 to $82,000 range.

Glassnode states that Bitcoin is currently constrained by supply pressure from long-term holders around the $83,000 to $85,000 range. If it breaks below this newly formed chip concentration area, $75,000 will become a key observation point, with further declines possibly returning to the accumulation platform near $60,000.

CryptoQuant analyst Axel Adler Jr. pointed out that the proportion of Bitcoin supply in profit has rebounded from about 47% at the end of June to about 69%. The 90-day change has also quickly turned positive from -19% in early August to about 41%, marking one of the fastest recoveries in Bitcoin's history.

Next week's regulatory calendar coincides with the interest rate meeting. Grayscale's research director Zach Pandl stated that the U.S. CLARITY Act, aimed at establishing comprehensive rules for the crypto market, will face a procedural vote in the Senate on September 15, requiring 60 votes for support. The Republican Party currently holds 53 seats, so cooperation from the Democrats is still needed for advancement. Even if the bill does not pass within the year, the regulatory framework for areas such as stablecoins, token issuance, tokenized securities, and perpetual futures will continue to become clearer.

Coinbase CEO Brian Armstrong noted that reaching 400,000 dollars for Bitcoin by 2030 remains a reasonable goal, and he personally believes that the bottom of this cycle may have already occurred. He also stated that regardless of the voting outcome on September 15, the SEC and CFTC are prepared to advance rules based on existing authority, and the industry may still gain new regulatory clarity before and after the vote.