The latest inflation data from the United States has sparked a surge of optimism across financial markets. The Consumer Price Index (CPI) for August rose 2.7% year-over-year, aligning with market expectations. Meanwhile, the Producer Price Index (PPI) saw a more significant cooling, registering at 1.8%, compared to the anticipated 2.1%. This trend indicates that underlying price pressures within the economy are easing, leading to renewed investor confidence that inflation is not on the rise again. As a result, market participants are now looking for potential shifts in the Federal Reserve’s strategy toward a more dovish stance.
This fresh wave of data prompted immediate reactions across various asset classes. Equities experienced notable rallies, Treasury yields dipped, and cryptocurrencies surged as traders began to factor in a higher likelihood of interest rate cuts by the end of 2025. For notable cryptocurrencies like Bitcoin and Ethereum, this macroeconomic shift presents a significant tailwind. Historically, increases in liquidity have acted as a catalyst for bull markets in the crypto space, and with recent uncertainties discounted, traders are now redirecting their focus onto price discovery and potential gains. The prevailing sentiment now revolves around not just the continuation of the bull run, but also the speed at which Bitcoin and Ethereum can reclaim their prior highs.
Bitcoin, specifically, is displaying robust bullish momentum after recently consolidating near significant highs. As the CPI and PPI indicate cooling inflation, market sentiment has turned towards anticipating Federal Reserve rate cuts, thereby enhancing liquidity and risk appetite. Short-term support for Bitcoin is identified around the $113K–$114K range, while resistance levels hover between $117K and $120K. Institutional inflows and anticipated ETF approvals are exerting additional upward pressure, suggesting a potential for medium-term price targets ranging from $130K to $140K. The longer-term outlook remains positive, with Bitcoin appearing to be on the verge of breaking out from a consolidation pattern characterized by a rising wedge. The weekly Relative Strength Index (RSI) is trading above the average and has recently displayed a bullish divergence, further signaling a possible bullish continuation. As Bitcoin approaches $125K, a sustained break above $118,000 this month could solidify this optimistic trend.
Ethereum is also positioning itself for significant bullish movement, buoyed by nearly 30% of its total supply being staked, which effectively reduces circulating liquidity. The current market environment—characterized by record-low exchange balances and high levels of short positions—suggests that Ethereum’s price is susceptible to upward pressure. With the favorable economic backdrop supporting risk-taking, short-term price targets for Ethereum lie between $2,800 and $3,200, while medium-term projections extend from $3,800 to $4,200. This solidifies Ethereum’s integral role in the ongoing crypto bullish trajectory. However, it is worth noting that after entering a bullish range, upward momentum in Ethereum appears to have slightly weakened, prompting concerns of a pullback to local support levels. The Chaikin Money Flow (CMF) is declining, indicating diminishing money inflows, whereas the Moving Average Convergence Divergence (MACD) shows waning buying pressure and is nearing a bearish crossover. Such indicators imply that Ethereum could test support at $4,271. Should bulls defend this level, a rebound could spur new highs; otherwise, a dip below $4,000 might be on the horizon.
In summary, the crypto market demonstrates strong bullish momentum, with Bitcoin taking the lead while altcoins gradually gain ground. Inflows of liquidity, heightened institutional participation, and sustained accumulation across leading assets point to increasing market confidence. A potential breakout in Bitcoin could catalyze rallies in Ethereum and other altcoins, possibly igniting a broader market surge. Key price levels to watch include $125K for Bitcoin, alongside an increase in altcoin dominance, signaling the onset of a new phase in the current bull cycle. The overall market environment suggests a powerful rally may be on the horizon.
