Bitcoin dropped below US$108,000 on September 1, hitting US$107,383 as traders reacted to new US inflation data and the upcoming Federal Reserve meeting.

Ether also fell to US$4,385, while XRP and Solana dropped to US$2.73 and US$198.6.

The declines followed July’s Personal Consumption Expenditures data, which showed core inflation up 2.9% year-on-year, the highest since February.

Analysts said elevated inflation reduced expectations for a September rate cut and weighed on sentiment.

Large bitcoin holders also sold significant amounts, triggering forced liquidations and adding pressure.

Analysts identified US$100,000 as a key support level for bitcoin and US$4,000 for ether, warning that breaking these levels could spark deeper drops.

Investors are watching this week’s US non-farm payrolls report and the Fed meeting on September 16-17 for signals on interest rates.

🔗 Source: The Block

🧠 Food for thought

1️⃣ Bitcoin’s inflation hedge reputation faces real-world test

Bitcoin’s recent decline following PCE inflation data highlights a disconnect between its theoretical role and market behavior during economic uncertainty.

Research confirms that Bitcoin has historically “appreciated in response to inflation shocks, confirming its inflation-hedging properties,” yet the same study found it “does not exhibit safe-haven qualities during financial uncertainty, unlike gold”1.

This contradiction played out in real-time as the cryptocurrency market saw a 3% decline following the PCE release, with core inflation hitting a five-month high of 2.9%2.

The selloff demonstrates that Bitcoin currently behaves more like a risk asset than an inflation hedge when traders face uncertainty about Federal Reserve policy.

Despite the 87.6% probability of a September rate cut, investors appeared to prioritize the immediate implications of sticky inflation over Bitcoin’s long-term inflation-hedging characteristics.

2️⃣ Bitcoin’s volatility follows historical boom-bust pattern