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Bitcoin Struggles to Hold $80K
Bitcoin is back to $78K after failing to hold $80K over the weekend. Now exactly why Bitcoin has been unable to hold $80K is likely due to a mix of macro-economic and technical factors. So let’s break them down starting from most consequential to least.  ● Fed Hike Odds: Markets are currently pricing in a 58% chance of a 25 basis point hike on September 16th. These odds have increased over the past two weeks on strong US labor prints and inflation readings still over 3%.
● Key Technical Resistance: $82.7K is Bitcoin’s last major lower high on the larger price structure. Getting a daily close above this level tilts Bitcoin back into a bullish pattern, so the bears are likely heavily defending this level.
● Rising US Bond Yields: Despite the US Treasury’s intervention, yields keep creeping north. The US30Y is currently 5.26%, only 4 bps lower than when the Treasury announced its buybacks. And the US02Y and US10Y are both elevated as well. Higher yields raise the opportunity cost of holding Bitcoin, given the latter doesn’t pay a yield.
● Oil Price Spike: WTI is currently trading at $93.50, up 16% since August 26th. The spike stems from renewed back-and-forth strikes between the US and Iran. Moreover, higher oil increases inflation, which raises the odds of a Fed hike.
How Bitcoin reacts from now through the 16th is going to be interesting, and the Fed’s decision adds uncertainty in either direction, given the Fed could go either way here. Moreover, further US Treasury intervention is an additional bullish wildcard that could hit again at any time, given the US Government needs to keep bond yields low in order to keep its debt servicing costs low.
Liquid Network (BTC L2) Gets White-Hat Hacked
We’ve got some related Bitcoin news that occurred over the weekend. Now it's not great, but we don’t believe it has had much, if any, effect on Bitcoin’s price.
On Sunday, the Bitcoin L2 - Liquid Network - which was built and is maintained by Adam Back’s Blockstream, got drained of 4,000 BTC, worth $320M. Now the group responsible says they’re white-hat hackers, and they’ve since returned 3,400 BTC back to Liquid Network, after Liquid’s developers said they’d fixed the vulnerability.  Therefore, the hackers are still holding around 598 BTC, worth $47M. It’s not clear whether the hackers will turn over the remaining BTC, as negotiations are apparently still ongoing.
Now the most important thing to note about this incident is that the Bitcoin protocol was not hacked. Liquid is a Bitcoin sidechain that issues L-BTC, which is backed one-to-one with real Bitcoin. The sidechain is used for faster settlement, and the exploit at fault was a software bug in Liquid’s code.
So that’s the entire incident. Let’s see how much of the remaining 598 Bitcoin gets returned to Blockstream, and how much the hackers negotiate for themselves as their security fee.
This Week’s Economic Data Prints
Consider this an extension of our main news story above, given Bitcoin’s price action is at a pivotal point and will be affected by the following economic prints. Moreover, even though the Fed’s decision is still a week out, don’t discount the importance of the following, given how close of a call we’re facing on the 16th.  ● PPI (Thursday, 8:30 am ET): Measures US producer inflation. The previous and forecasted MoM prints are 0.0% and 0.4%, respectively.
● CPI (Friday, 8:30 am ET): Measures price changes on a fixed basket of US consumer goods and services. The previous and forecasted MoM prints are 0.1% and 0.4%, respectively. And the previous and forecasted YoY prints are both 3.4%.
● Core CPI (Friday, 8:30 am ET): Same CPI report, but stripping out food and energy. This is a cleaner read on underlying inflation. The previous and forecasted MoM prints are both 0.2%.
Now these are the last major inflation prints before the Fed’s meeting next week. Don’t expect hike odds to fall unless the above comes in clearly soft, and hot prints should do the opposite.
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