Bitcoin’s initial rally following softer-than-expected U.S. inflation data quickly faded Wednesday, with BTC retreating to around $84,000 after briefly breaking above $85,500.
Core PCE inflation rose 0.2% in August, below the 0.3% consensus forecast. Core prices were 3% higher than a year earlier, also undershooting the 3.3% estimate.
Bitcoin jumped more than 2% shortly after the government released the PCE report, pushing the price above $85,500. The move was later reversed as leveraged short positions were squeezed, bringing bitcoin back toward its pre-report level of $84,000.
U.S. stocks held onto their gains. The Nasdaq advanced more than 1% to a session high, while government bond yields moved modestly lower.
Chicago manufacturing data beats forecasts
The Chicago PMI climbed to 58.8 in September from 47.1 in August, far exceeding economists’ expectation of 51.2.
The stronger-than-expected reading arrived as markets began giving back some of the initial gains sparked by the PCE report about 90 minutes earlier.
The 10-year Treasury yield was 1.2 basis points lower at 5.248%, while bitcoin traded near $84,550, approximately $1,000 below its post-PCE peak.
October rate-hike odds drop below 50%
Expectations for a Federal Reserve rate increase in October had already fallen after New York Fed President John Williams delivered a dovish speech the previous day.
Following the softer inflation figures, CME FedWatch showed the implied probability of a hike at the Fed’s Oct. 28 meeting falling to 47.1%. The figure was around 70% 48 hours earlier.
The Bureau of Labor Statistics, which compiles the PCE data, also changed the methodology used to calculate some components of the inflation measure. Some market observers suggested the adjustment could have contributed to the softer-than-expected result.
Treasury yields decline as bitcoin rises
Bitcoin climbed roughly 1% to $84,750 immediately after the PCE figures showed inflation below expectations.
The 10-year Treasury yield fell 4.2 basis points to 5.218%, while the two-year yield dropped 2.1 basis points to 4.868%. U.S. stock futures were up approximately 0.4%.
The headline PCE price index rose 0.3% in August, compared with 0.1% in July and a 0.4% forecast. Annual headline inflation was 3.4%, unchanged from July and below the 3.7% estimate.
Core PCE increased 0.2% month over month and 3% year over year, compared with forecasts of 0.3% and 3.3%.
Private hiring exceeds expectations
ADP reported that U.S. private-sector employment increased by 90,000 jobs in September. That followed a gain of 36,000 in August and exceeded the 70,000 economists had expected.
Investors were also preparing for Friday’s official U.S. employment report for September.
Real yields continue to weigh on bitcoin
Bitfinex analysts identified U.S. inflation-adjusted Treasury yields as one of the main pressures facing bitcoin.
The 10-year real yield increased to 2.83% from 2.68% during the week ending Sept. 25. Higher real yields raise the opportunity cost of holding assets such as bitcoin and gold that do not provide regular income.
Multicoin invests in Grass
Multicoin Capital invested in Grass, a platform focused on providing data access for machine intelligence, through its hedge and venture funds.
Grass said it has reached profitability and generated significant revenue after initially supplying pretraining data to frontier AI laboratories through millions of residential connections.
Multicoin said it sees the project as potential infrastructure for autonomous AI agents, citing its specialized search and content APIs and the growing market for real-time information retrieval during AI inference.
S&P 500 breadth weakens
Only 25% of S&P 500 stocks were trading above their 50-day moving averages, the lowest proportion since April 2, according to The Kobeissi Letter.
The measure has fallen from 70% in mid-August, pointing to a significant deterioration in market breadth.
The crypto market remained comparatively resilient.
Bitcoin and gold await inflation figures
Before the PCE release, bitcoin was slightly higher around $83,700, while gold traded just below $4,200 an ounce.
PCE was the key U.S. economic release because it is the Federal Reserve’s preferred inflation gauge. Economists had expected core PCE to rise 0.3% monthly and 3.3% annually, while GDP growth was forecast at 1.5% quarter over quarter.
Markets were pricing a 57% probability that the Fed would leave rates unchanged at its Oct. 28 meeting.
Standard Chartered sets $2 target for ENA
Standard Chartered initiated coverage of Ethena’s ENA token with a $2 price target for the end of 2028. At the time, that represented a gain of nearly 670% from the token’s market price of about 26 cents.
The bank pointed to growing demand for yield-generating stablecoins and the expansion of tokenized assets across decentralized and traditional finance. It also highlighted USDe’s rapid rise to a $10 billion market capitalization within its first nine months.
Standard Chartered cited Ethena’s buyback-and-burn program and projected that USDe supply could reach $40 billion by 2028. Slower adoption and weaker growth in real-world assets were identified as potential risks.
Gold remains focused on $4,200
Gold traded near $4,200 an ounce, with XS.com executive Simon-Peter Massabni describing the level as a key technical area.
Massabni said a daily or four-hour close above $4,200 would be needed to confirm another upward move.
Federal Reserve policy remains an important factor for gold because the metal generates no interest income. Expectations for higher rates can therefore increase the relative attractiveness of bonds and cash.
Massabni said an above-forecast PCE reading could lead to another period of short-term selling pressure in gold.
Attention will then shift to the monthly jobs report. A weaker employment reading could reduce expectations for further rate increases.
Bitcoin was already consolidating ahead of PCE
Before the inflation report, bitcoin had slipped 0.3% to roughly $83,700 as traders awaited the data.
A hotter inflation reading could have strengthened expectations for further rate increases, which had already contributed to the bond market selloff during September. Brent crude had climbed above $103 a barrel and was up around 14% for the month despite Middle East crude flows returning to pre-war levels.
Treasury markets stabilized after 30-year yields reached their highest level since 2002, while the dollar remained close to its strongest level since July.
Ether fell 0.7% to about $2,690. HYPE declined nearly 2%, making it the weakest major cryptocurrency, while XRP and TRX each gained less than 1%, according to CoinDesk data.
CryptoQuant estimated that bitcoin’s spot demand had fallen by about 170,000 BTC over the previous 30 days. Growth in futures demand had also dropped 90% since Sept. 14.
Micron Technology was scheduled to report earnings after the U.S. market close, with the results offering another test for AI-linked stocks that had helped limit the S&P 500’s losses during the bond selloff.
