The release of the July Personal Consumption Expenditures (PCE) index, the Fed's preferred measure of inflation, comes at a highly vulnerable moment for the cryptocurrency market. The consensus forecast calls for core PCE to rise by 0.2% month-on-month and to 3.2% year-on-year. Meanwhile, softer-than-expected July CPI, PPI, and import prices have already convinced some analysts that the regulator will leave rates unchanged at its September meeting.

Based on this softer inflation picture, the probability of rates remaining unchanged has risen to 65%, compared with nearly even odds before the July data were released. Bitcoin, meanwhile, surged to $81,000, the Fear and Greed Index climbed to 74, and last week's short squeeze was driven largely by declining expectations of tighter monetary policy.

However, there is an important consideration here. The extent to which positive expectations have already been priced in creates a risk of a sharp reversal in the event of an unfavorable surprise. If today's PCE reading comes in above consensus, the market will immediately revise the probability of rates remaining unchanged in September back toward 50% or even toward a rate hike. The transmission mechanism to the cryptocurrency market is direct and well established: rising inflation expectations strengthen the dollar, push up Treasury yields, and undermine the rationale behind the entire rally of the past week—the expectation that the Treasury will increase liquidity through bond buybacks precisely because monetary conditions are easing rather than tightening.

The fact that the current rally has been partly driven by the forced closing of short positions rather than purely organic demand also creates a particular risk, making the market similarly vulnerable to a reversal.

Bitcoin

Buy Scenario

Scenario #1: Today, I will buy Bitcoin when the entry point reaches around $78,800, with a target of $79,800. Around $79,800, I will exit the long position and immediately sell on a rebound. Before buying on a breakout, make sure that the 50-day moving average is below the current price and that the Awesome Oscillator is above zero.

Scenario #2: Bitcoin can be bought from the lower boundary at $78,200 if there is no market reaction to a breakout below this level, with a reversal toward $78,800 and $79,800.

Sell Scenario

Scenario #1: Today, I will sell Bitcoin when the entry point reaches around $78,200, with a target of $77,300. Around $77,300, I will exit the short position and immediately buy on a rebound. Before selling on a breakout, make sure that the 50-day moving average is above the current price and that the Awesome Oscillator is below zero.

Scenario #2: Bitcoin can be sold from the upper boundary at $78,800 if there is no market reaction to a breakout above this level, with a reversal toward $78,200 and $77,300.

Ethereum

Buy Scenario

Scenario #1: Today, I will buy Ethereum when the entry point reaches around $2,471, with a target of $2,486. Around $2,486, I will exit the long position and immediately sell on a rebound. Before buying on a breakout, make sure that the 50-day moving average is below the current price and that the Awesome Oscillator is above zero.

Scenario #2: Ethereum can be bought from the lower boundary at $2,455 if there is no market reaction to a breakout below this level, with a reversal toward $2,471 and $2,486.

Sell Scenario

Scenario #1: Today, I will sell Ethereum when the entry point reaches around $2,455, with a target of $2,439. Around $2,439, I will exit the short position and immediately buy on a rebound. Before selling on a breakout, make sure that the 50-day moving average is above the current price and that the Awesome Oscillator is below zero.

Scenario #2: Ethereum can be sold from the upper boundary at $2,471 if there is no market reaction to a breakout above this level, with a reversal toward $2,455 and $2,439.