CryptoSlate
US inflation hit 3.7% year over year in September, above the 3.6% forecast, while core CPI rose to 2.6%, also topping expectations. After the Oct. 14 release, markets priced a roughly 47% chance of an October Fed rate hike, up from about 20% beforehand. Bitcoin fell to an intraday low of $81,588.88.
Why it matters
The inflation surprise has raised the prospect of further monetary tightening. The Fed had already lifted its target range by a quarter percentage point to 3.75%-4.00% on Sept. 16. Another increase would extend that tightening at the Oct. 27-28 meeting, though markets are still pricing a hike as less than a certainty.
Higher yields can make interest-bearing dollar assets more attractive relative to Bitcoin, which does not pay interest. Post-release, the two-year Treasury yield stood at 4.872%, up seven basis points on the day, while the dollar strengthened against a basket of currencies.
Market impact
The monthly figures point to pressure beyond the headline rate: CPI rose 0.6% in September after 0.4% in August, with gasoline up 9.1% and accounting for more than half of the monthly increase. Core CPI increased 0.3% month over month, above the 0.2% forecast.
Bitcoin was down 2.00% over 24 hours. Deribit put options were concentrated at $76,000-$80,000 for the Oct. 16 expiry, offering holders a way to hedge downside. Whether elevated yields persist ahead of the Fed decision is a key factor for Bitcoin's near-term rate outlook.
Frequently asked questions
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How much did markets' October Fed hike odds change after the CPI release?
Markets priced roughly a 47% chance of an October hike after the release, up from about 20% beforehand.
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What were the September headline and core CPI readings?
Headline CPI rose 3.7% year over year, while annual core CPI increased to 2.6%. Both exceeded the forecasts cited in the seed.
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Why can rising Treasury yields weigh on Bitcoin?
Higher yields can make interest-bearing dollar assets more attractive relative to Bitcoin, which does not pay interest.
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What happened to Bitcoin after the inflation data?
Bitcoin hit an intraday low of $81,588.88 on Oct. 14 and was down 2.00% over 24 hours.
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What options levels were cited as a downside hedge for Bitcoin?
Deribit put options were concentrated at $76,000-$80,000 for the Oct. 16 expiry.
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