August 12: Why this report will become a key trigger for Bitcoin
The cryptocurrency market is holding its breath: the release of July US inflation statistics, scheduled for August 12, could be the decisive factor for Bitcoin's movement. This data will determine whether the Federal Reserve decides to raise interest rates as early as September. Directly depending on this decision is whether the first cryptocurrency can break through the psychologically important level of $70,000.
The labor market has cracked
The current macroeconomic situation is mixed. Fresh employment data has significantly adjusted investor expectations. In July, the US economy lost 23,000 jobs, although the market had forecast growth. The unemployment rate, meanwhile, fell to 4.1%. However, the key signal is the massive revision of previous data: figures for May and June were collectively downgraded by approximately 103,000 jobs. This is no longer a one-off glitch, but a sustained trend of a cooling labor market.
The market reaction was swift: the probability of a September rate hike after this data fell from 55% to 41%. The weak labor market report significantly shifted the picture, but the final answer will come from consumer price statistics.
Three scenarios for inflation
The consensus forecast for July inflation is around 3.4% year-over-year, with a core reading of about 2.2%. I see three possible scenarios for how things unfold. If the data comes in below forecast, bond yields will decline, and the technology sector and cryptocurrencies will see the most positive impact. If the numbers match expectations, we will see short-term volatility without a change in the overall picture, and the chances of a September hike will remain balanced. The most negative scenario is an acceleration of inflation to 3.5–3.6% or higher. In that case, the market will return to expectations of tightening, yields will rise, and both expensive tech stocks and cryptocurrencies will come under pressure.
The oil factor deserves special attention. The sharp slowdown in June was driven by falling gasoline prices, but by July the fuel component became unstable again. This adds risks to the overall forecast.
My assessment of the situation
The most dangerous combination for the regulator is a weak labor market combined with high inflation. Raising rates under such conditions is risky for the economy, but ignoring rising prices is impossible. The historical correlation here is clear: in February, April, and July, data came in below forecast and supported markets—after the July report, the Nasdaq gained more than a percent, and Bitcoin rose from $62,000–63,000 to above $64,000. Conversely, on May 12, inflation exceeded expectations, leading to higher yields and pressure on cryptocurrencies.
The base scenario assumes data matching expectations, but the market could read it negatively, since removing the threat of a rate hike requires inflation to decline in both August and September. Ahead of the data release, I expect elevated volatility in both stocks and cryptocurrencies—with it being more pronounced in the equity market. August 12 will be the day of truth for the entire spectrum of risky assets.