Bitcoin has made multiple attempts to decisively surpass the significant $80,000 threshold, yet the more pertinent inquiry revolves around the reasons it has not experienced a more substantial decline. After all, the macro landscape is anything but optimistic given the renewed tensions between the US and Iran, the aggressive stance of the Federal Reserve, and the unexpectedly robust employment figures. The latest geopolitical developments emerged this weekend as the two warring parties engaged in renewed hostilities following the launch of ballistic missiles by Iran’s Revolutionary Guard targeting two US Navy vessels. The US subsequently struck three Iranian crude oil carriers, while the Middle Eastern country also targeted tankers and US-linked vessels in the waters around the Strait of Hormuz.
The escalation extends well beyond the realm of geopolitics, as Brent crude approached $100 per barrel once more, driven by renewed apprehensions regarding energy supplies. Elevated oil prices can directly contribute to inflationary pressures, complicating the Federal Reserve’s decision-making process in the upcoming week. The US central bank has emerged as an additional concern for BTC. Chair Kevin Warsh adopted a distinctly more hawkish tone at Jackson Hole last week, emphasising that inflation remains too high and that the Fed could still have “work to do.” The likelihood of a September rate increase surged following the speech and escalated further after the jobs report released on Friday. It indicated that the US economy generated 162,000 jobs in August, significantly surpassing expectations of 56,000, while the unemployment rate held steady at 4.1%.
While this development is favourable for the economy, risk assets do not gain traction as the prospect of more accommodative monetary policy diminishes in light of rising inflation. At their peak, the probabilities of a rate hike in September surged to 65%. The two-year Treasury yield attained its peak since January 2025, the dollar appreciated, and equities faced downward pressure. Bitcoin experienced an initial decline of $3,000; however, it quickly recovered. All of the above creates an environment that is significantly detrimental to risk-on assets such as BTC. Yet it remains at $80,000 even during the weekend when the attacks in the Middle East resumed, and it’s up roughly 25% over the past month. One aspect contributing to the strong performance of the cryptocurrency can be attributed to the performance of the ETF. The funds persist in drawing considerable capital, as evidenced by Thursday’s performance. Over $730 million flowed into the ETFs, marking the highest single-day level since January.
What is particularly noteworthy is that gold has experienced a considerable decline in the gains recorded following the mid-August rally, whereas BTC remains resilient. However, this does not ensure that BTC is immune to declines. In fact, there are two significant threats anticipated in the forthcoming 10 days or so. First, it’s the Consumer Price Index, which arrives on September 11. A hotter-than-expected inflation reading, particularly following the increase in oil prices, may elevate expectations for a rate hike even more. Then it’s the conclusion of the FOMC meeting on September 16. An increase in the rates combined with hawkish guidance from Warsh could finally push BTC through key support levels, as discussed yesterday.
