Bitcoin briefly rallied above $85,500 on Wednesday morning following the release of lower-than-expected U.S. personal consumption expenditures (PCE) inflation data for August, but a subsequent sell-off reversed most of the gains.
The surge began around 8:20 a.m. EST when bitcoin reclaimed the $83,500 level, reaching $83,700 before spiking to a daily high of $85,600 less than an hour after the PCE release. The price then declined sharply to $84,350 by 10:35 a.m., leaving bitcoin trading above $84,000 as of late Wednesday with a 1.3% daily gain.
The intraday volatility triggered significant liquidations in the derivatives market. According to Coinglass data, short bets worth $55 million were liquidated within four hours, compared with $27 million in long positions.
Bitcoin's price action reflected the broader market reaction to the inflation data. Prior to Wednesday's surge, bitcoin had fluctuated in the $83,000 to $83,500 range following a decline to $82,555 on Monday, with bearish pressure repeatedly pushing the price below the $83,500 resistance level.
Some chart analysts project further price weakness ahead. Analyst Ted Pillows noted that bitcoin's recent technical pattern resembles early 2023, when a sharp correction followed confirmation of a cycle bottom, suggesting a potential drop into the high $70,000s before the next advance.
The volatility comes amid uncertainty over Federal Reserve policy. Economist Sal Guatieri of BMO Capital Markets noted that while the August inflation data was less concerning than feared, elevated price pressures and a resilient economy could lead to another rate hike before year-end, which could limit upside potential for risk assets like bitcoin.
For the month, bitcoin recorded a 7.3% gain in September and a 37% gain for the third quarter.
