Bitcoin holds above $83,000 as rally after US inflation data fades

Bitcoin held above $83,000 on Thursday after giving back gains that followed a lower-than-expected US inflation reading. Coinbase data showed BTC/USD flat on the day after brief volatility ahead of September's monthly and third-quarter close. Bitcoin's latest rally stalled on Wednesday when BTC/USD reversed at $85,600. The Personal Consumption Expenditures price index rose 3.4% year-on-year in August, against expectations of 3.7%. The Bureau of Economic Analysis said core PCE, which excludes food and energy, rose 3.0% from a year earlier. The release incorporated methodology changes affecting portfolio management and investment advice, computer software and accessories, and legal services. The Kobeissi Letter estimated that the methodology changes alone could reduce core PCE inflation by up to 20 basis points. The Kobeissi Letter also noted that July headline and core PCE inflation had been revised downward by 30 basis points. The Kobeissi Letter forecast that markets would heavily discount the August reading. The S&P 500 closed Wednesday down 0.25% at 7,651 points. The Dow Jones Industrial Average fell 0.86% on Wednesday. CME FedWatch Tool data showed markets assigned around a 37% probability on Wednesday to a quarter-percentage-point rate increase at the Federal Reserve's October meeting, little changed on the day. Unlike last week, markets favored keeping the federal funds target range unchanged at 3.75% to 4%. Bitcoin began the fourth quarter at around $83,550 after gaining 42.7% in the third quarter, according to CoinGlass data. That was Bitcoin's best third-quarter performance since 2017. The fourth quarter has historically been Bitcoin's strongest. A CoinGlass liquidation heatmap showed potential liquidation clusters above and below Bitcoin's market price. A new cluster of estimated liquidation exposure worth $60 million appeared near $83,000 on Thursday. That cluster was close to support at $82,500, a level analysis marked as critical for Bitcoin's broader rebound from June lows. Glassnode said Bitcoin's price had risen 35% from its August low while BTC-denominated futures open interest had fallen almost 20%. Glassnode said open interest was at its lowest since March, potentially making the rally less vulnerable to forced liquidations. Sell orders around $85,000 and long-term holder coins clustered between $84,000 and $85,000 could reinforce resistance above the current price.