Bitcoin ( BTC ) experienced a 7% drop between Sept. 5 and Sept. 7, but it managed to maintain a daily closing price near $54,000 and later recovered some of its losses, reaching $55,300. This movement mirrored the price action in global stock markets, but several factors, including anticipated inflation data and growing risks to the dominance of the United States dollar, can help explain the rise in Bitcoin’s price.

Mixed expectations for Bitcoin’s price based on US inflation numbers

The SP 500 index futures rose by 1.4% since hitting their low on Sept. 6, as investors grew more confident that the US central bank would cut interest rates to stimulate the economy in the upcoming months. Economists are predicting a slowdown in inflation, which has historically been a hurdle to implementing a less restrictive monetary policy. A 2.6% year-over-year US CPI increase is anticipated for August, with the report due on Sept. 11.

The impact of lower inflation on Bitcoin is not straightforward or entirely clear, given that part of the cryptocurrency’s appeal has been its hedging capability due to its fixed monetary policy. However, some analysts believe that Bitcoin’s price benefits from increased liquidity in the system as businesses and individuals gain access to cheaper capital and yields on fixed-income investments decline.

Source: apsk32

User apsk32 took to X social network to demonstrate that the previous interest rate decline cycle in the US, which began in 2019, initially spurred bullish momentum for Bitcoin, although this proved unsustainable in the medium term. Nonetheless, the analyst posits that a potential correction to the $45,000 to $55,000 range could offer an excellent entry point for "the survivors."

Consequently, it is prudent to regard any bullish predictions for Bitcoin’s price due to a decline in interest rates with skepticism. Some contend that Bitcoin's greatest threat comes from competition with tech stocks, whether due to extended periods of correlation between the two assets or simply because these companies provide dependable cash flow and growth opportunities amid relative scarcity.

US presidential elections could boost Bitcoin’s price

Regardless of the monetary policies pursued by the US Federal Reserve, investor focus is shifting to the US presidential election in November. The Republican party and former President Donald Trump have proposed imposing 100% import tariffs on countries that bypass the US dollar in international transactions.

Recently, nations such as China, India, Brazil, and Russia have considered moving away from the US dollar by using cross-collateral transactions. In response, candidate Trump has promised to uphold the US dollar’s status as the world’s preferred reserve currency, reaffirming this commitment at a Wisconsin rally on Sept. 7, as reported by Bloomberg.

Ulrich Leuchtmann, a strategist at Commerzbank AG, noted that Trump’s plan might inadvertently encourage countries to "move away from the dollar," potentially undermining the safe-haven status of US Treasurys, according to Yahoo Finance. Leuchtmann advises investors to consider Trump's campaign statements critically, acknowledging that not all promises may come to fruition.

From a Bitcoin investment standpoint, a weaker US dollar generally bodes well for its price, though it does not assure that Bitcoin will outperform traditional stores of value like gold, stocks, or real estate. However, the resilience of Bitcoin's primary derivatives demand metric should be viewed as a positive indicator.

Related: Bitcoin ETFs record combined $1.2B in outflows in 8 days

Bitcoin derivatives held firm despite the recent price correction

Bitcoin monthly futures carry inherent costs due to their prolonged settlement periods, with sellers typically demanding a 5% to 10% annualized premium to compensate for this risk.

Bitcoin 2-month futures annualized premium. Source: Laevitas

The annualized Bitcoin futures premium (basis rate) has stabilized at 6%, indicating that demand for leveraged bets on a price decline has remained consistent over the past week. Although this level is below the more bullish 8% from four weeks ago, the data indicates a robust market, supporting the strength of the $54,000 support level despite recent price volatility.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.