Bitcoin Retracement Analysis
Bitcoin retraced to a key support level following US data, with traders focusing on Fed Chair Powell’s upcoming speech at the Jackson Hole Symposium. Early last week, Bitcoin performed well after the US CPI report, but subsequent data, including a higher-than-expected US PPI, improved jobless claims, and increased inflation expectations, prompted profit-taking and hedging.
Powell is expected to refrain from committing to any specific actions, instead basing decisions on available data. Should he signal a rate cut for September, Bitcoin might rally as hedges are unwound. Conversely, suggesting inadequate data for a September rate cut could push Bitcoin lower.
On the daily chart, Bitcoin fell to the support level around 111,900, where buyers might enter aiming for a rally to a new high. Sellers, however, may push for a break lower toward the 100,000 level. The 4-hour chart shows a minor downward trendline indicating bearish momentum. Sellers may continue leveraging the trendline, while buyers strive for a break to boost bullish bets.
On the 1-hour chart, resistance at 114,500 and a trendline offer a point for sellers, while buyers need a break above to reverse the trend. Upcoming events include Fed speeches, FOMC minutes, and US economic data, leading to Powell’s speech on Friday.
Current Economic Conditions
Given the recent hot economic data, we are seeing a classic risk-off move in Bitcoin ahead of the Jackson Hole speech. The latest Producer Price Index for July 2025 came in at a surprising 0.6% month-over-month, and last week’s jobless claims fell to a six-month low of 205,000, suggesting the economy is still running too warm for the Fed’s comfort. This has caused traders to sell off risk assets like Bitcoin, pushing the price down to a critical support level.
We remember the aggressive rate hikes of 2022 and 2023, and the market is now extremely sensitive to any hint of renewed hawkishness from the Federal Reserve. The fear is that Fed Chair Powell will use his speech to shut down any expectation of a near-term rate cut, which would strengthen the dollar and hurt crypto. Consequently, traders have been buying downside protection, pushing the 25-delta skew for Bitcoin put options to its highest level in three months.
From a derivatives perspective, the pullback to the $111,900 support level is creating a major decision point. Open interest has been rising as the price has fallen, indicating that new short positions are being opened rather than just long-term holders selling. Funding rates for perpetual swaps have also flipped negative on several exchanges, showing that traders are willing to pay a premium to bet on further price declines.
Market Strategy
If Powell signals that a rate cut in September is still possible, we should prepare for a significant short squeeze. In this scenario, traders would look to close their short positions and unwind hedges, which could quickly propel the price back towards the recent highs. A strategy here would involve buying call options to capture the explosive upside potential while maintaining a defined risk.
Conversely, if Powell explicitly rules out a September cut, it would likely serve as a catalyst for a break below the $111,900 support. This would be a clear signal for bears to add to short positions or buy puts, with the next major psychological and technical target being the $100,000 level. We would expect a cascade of liquidations if that key support fails to hold.
In the immediate short term, we are watching the minor downward trendline and the resistance zone around $114,500. For aggressive bears, this area provides a clear level to initiate short positions with a tight stop-loss just above the trendline. Bullish traders, on the other hand, should wait for a confirmed break above this resistance before considering long positions, as that would be the first sign that this bearish momentum is fading.
