Investors have driven up the price of Bitcoin by more than 2.5% today, reaching a September high of over $27,400. This surge follows a weekend where Bitcoin maintained the critical $26,000 level, instilling confidence in traders and analysts. The upswing can be attributed to several key factors.

Annual Core CPI Falls Ahead of FOMC

The recent Consumer Price Index (CPI) report from September 13 indicates that inflation rose to 3.7% in August, slightly higher than July’s 3.5%. However, the annual core CPI, which excludes food and energy prices, showed more promising data. August’s annual core CPI stood at 4.3%, a slight dip from the previous month’s 4.5%. This suggests that inflation might not reach the U.S. Federal Reserve’s 2% target, raising hopes for a pause in interest rate hikes at the upcoming Federal Open Market Committee (FOMC) meeting on September 20. Investors see this as a positive development for risk assets like Bitcoin.

Bitcoin price. Source: TradingView

Institutional Interest in Bitcoin

Institutional interest in Bitcoin is also bolstering market sentiment. Several major institutions have applied for Bitcoin exchange-traded funds (ETFs) following a favorable ruling for Grayscale Bitcoin Trust (GBTC) by U.S. Court of Appeals Circuit Judge Neomi Rao on August 29. Companies like BlackRock and Fidelity Investments are showing growing interest in Bitcoin, with Franklin Templeton recently filing for a spot Bitcoin ETF. While the SEC has yet to approve a spot Bitcoin ETF, institutional interest remains high, and another postponement of the SEC’s decision deadline on October 16 is likely.

BTC balance on exchanges. Source: Coinglass

Declining Bitcoin Supply on Exchanges

Bitcoin’s price rally coincides with a decrease in BTC supply on exchanges, which has fallen since the September 4 peak. This trend is seen as a bullish signal because it reduces the available supply for spot selling. With Bitcoin continually leaving exchanges, short liquidations have had a notable impact on price. In the past 24 hours, over $28.4 million worth of BTC shorts were liquidated, with $27.9 million liquidated in just 12 hours. Despite short-sellers dominating the futures market, there is potential for a short squeeze, potentially driving Bitcoin prices even higher.

Bitcoin Fear & Greed Index. Source: Alternative.me

While Bitcoin shows short-term bullish momentum ahead of the FOMC meeting, the Bitcoin Fear & Greed Index still signals “fear,” albeit with a slight improvement from the previous month.