Bitcoin slid to around $63,500 despite a boost from the U.S. July consumer price index (CPI).

On Aug. 12 (local time), blockchain media outlet Cointelegraph reported that the market has strongly priced in the possibility that the U.S. Federal Reserve will hold rates steady in September. It added that whether bitcoin can keep the $63,000 support level has emerged as a more important variable.

On TradingView, BTC/USD turned weak around the U.S. stock market open and gave up the day's gains. The U.S. July CPI rose 0.1 percent from the previous month and 3.4 percent from a year earlier, matching market expectations. The U.S. Bureau of Labor Statistics (BLS) said the shelter index rose 0.1 percent in July, accounting for about two-thirds of the monthly increase in overall prices, and food prices also rose 0.1 percent. The energy index fell 1.5 percent.

The CPI was not a below-forecast surprise like June, but it did not create new volatility across risk assets. The U.S. stock market was largely calm, and gold, a safe-haven asset, remained steady after hitting a nine-week high the previous day.

Investors focused more on the Fed's next steps than the inflation data itself. Fabian Dori, chief investment officer at Signum Bank, viewed the CPI alongside a cooling labor market as potentially lowering the need for additional rate hikes. "The in-line CPI, following last week's loss of 23,000 jobs, points to a gradual economic slowdown without recession fears or a hawkish repricing," he said. "The September rate outlook will remain largely stable," he added.

According to CME Group's FedWatch tool, the probability that the Fed will keep the benchmark rate at 3.50 to 3.75 percent at its September meeting was calculated at 60 percent. That is double the 30 percent seen a month earlier. Expectations of a rate hold could be favorable for liquidity conditions in risk assets including cryptocurrencies, but bitcoin's price has yet to reflect it strongly.

The next market variable is the July producer price index (PPI) due on Aug. 14. June PPI, like the CPI, came in below expectations. Andrei Grachev, managing partner at DWF Labs, said "CPI alone cannot offset weak employment data." He added that the bitcoin options market is still attaching a premium to downside protection.

Technically, warnings continued that support at $63,000 is weakening. Trader Rekt Capital said upward momentum is slowing with each rebound from the $63,000 level, with rebound sizes shrinking to 6.27 percent, 5.83 percent, 3.18 percent and 1.15 percent.

Overhead resistance also remains clear. Bitfinex's research unit Bitfinex Alpha said bitcoin has repeatedly been capped in the $65,000 to $65,500 range. The price traded above $65,000 intraday for six straight sessions from Aug. 5 to 10, but has not broken above that level on a closing basis even once since July 26.

The inflation data raised expectations of a September rate hold by the Fed, but did not translate into immediate upward momentum for bitcoin. In the short term, the market is expected to check whether the $63,000 support level holds and whether PPI will ease downside caution in the options market.

#BTC The progressively weakening support at ~$63k (orange) is clear 6.27% --> 5.83% --> 3.18% --> and now 1.15% thus far At some point the bounces will become so weak that the floor will simply break$BTC #Bitcoin https://t.co/y5DDSyAtdL pic.twitter.com/muFx2DZMvI