Inflation data released on Aug. 26 showed July's Personal Consumption Expenditures (PCE) inflation holding at 3.7% headline and 3.3% core, keeping both metrics above the Federal Reserve's 2% target. Following the report, futures markets adjusted the odds of a September rate hike to roughly 44%, up from 36%. Despite the macro headwind, Bitcoin reached an intraday high of $79,251.60 and traded near $78,000.
Bitget Research chief analyst Ryan Lee noted that a core print meeting consensus leaves the existing policy debate largely intact. Lee pointed out that Bitcoin's price direction is driven more heavily by spot liquidity, ETF flows, and derivatives positioning rather than new macroeconomic catalysts.
Data from Glassnode and Farside Investors highlights strong underlying spot demand supporting the market. US-traded spot Bitcoin ETFs absorbed $2.23 billion around the initial squeeze, led by consistent inflows including $314.3 million on Aug. 25 alone—with BlackRock's IBIT contributing $284.4 million. Cumulative inflows across the positive streak from Aug. 17 through Aug. 25 reached approximately $2.6 billion, accompanied by accumulation across every wallet-size cohort.
The rally was initially driven by a massive short-liquidation event on Aug. 19, which marked the largest dollar-denominated single-day short squeeze in Glassnode's dataset since 2019, with roughly 85% of liquidations coming from short positions. Unlike typical leverage-driven rallies, Bitcoin futures open interest fell 11% in BTC terms during the squeeze while perpetual funding stayed near neutral, indicating that speculative leverage was flushed rather than immediately rebuilt.
Sygnum Bank CIO Fabian Dory described the broader liquidity backdrop as gradual disinflation rather than a demand shock, noting that channels such as Treasury cash balances, private credit, and continued stablecoin expansion remain constructive. Total stablecoin market capitalization sits near $303.7 billion, rising $2.8 billion over a one-week period, with NYDIG data showing a $1.25 billion supply increase during the rally driven mostly by USDC.
Looking ahead, analysts note key technical levels facing the market. A confluence zone between $81,000 and $86,000 includes dealer gamma positioning and remaining short-liquidation levels, with Glassnode establishing a settled close above $83,300 as confirmation for a genuine breakout. On the downside, the short-term-holder cost basis sits near $70,000, with deeper support floors identified between $62,000 and $65,000.
Additionally, a large derivatives expiry on Deribit features roughly 81,700 Bitcoin options worth $6.44 billion expiring, with calls outnumbering puts and implied volatility rising from the fourth percentile of the trailing twelve months to the 56th percentile.
