Bitcoin surged past $85,500 on Sept. 30 after the government reported softer-than-expected August inflation, then gave back nearly all of the gain within hours. Bond yields rebounded, short sellers took heavy losses, and analysts remain split on whether the pullback opens the door to a deeper correction or a fresh push higher.
Bitcoin surged past $85,500 on Sept. 30 after the government reported softer-than-expected August inflation, then gave back nearly all of the gain within hours. By 3:28 p.m. UTC the cryptocurrency traded near $84,000, leaving the breakout above $85,000 short-lived.
August inflation data sparks the rally
The rally followed the Bureau of Economic Analysis's release of the August personal consumption expenditures report at 12:30 p.m. UTC. Headline PCE inflation came in at 0.3% month over month and 3.4% year over year, while core inflation, which excludes food and energy, rose 0.2% month over month and 3.0% year over year. The report also carried annual revisions to personal income and outlays data going back to January 2021, so comparisons with earlier releases require care.
Headline inflation still sat above the Federal Reserve's longer-run 2% target. Though inflation stayed elevated, the release did not determine the central bank's next move.
Yields rebound while short sellers get squeezed
Bitcoin's reversal coincided with a rebound across other markets. The US ten-year yield stood near 5.276%, while the UK 30-year yield traded around 5.939%, extending a broader recovery in bond yields. Stocks and oil turned higher alongside them. The SPDR S&P 500 ETF Trust traded around $766.82, while Brent crude rebounded toward $102.20 a barrel. Gold slipped back to around $4,163.92 an ounce after an earlier push above $4,200.
The swing also hit leveraged crypto traders hard. Coinglass data showed $55 million in short bets liquidated within four hours. That compared with $27 million in long bets liquidated. Even after the pullback, bitcoin remained about 1.3% higher on the day, capping a 7.3% gain for September and a 37% gain for the third quarter.
Analysts split on the next move
Despite a recent 25-basis-point rate hike, many analysts still expect the Federal Reserve to raise rates again this year. Sal Guatieri, a senior economist at BMO Capital Markets, said the report "may buy the Fed time to await more data and pass on October 28", but added that persistent inflation still points to another hike by year-end.
Chart analyst Ted Pillows pointed to a setup he compared to early 2023, when bitcoin corrected sharply after confirming a cycle bottom, suggesting the market could see a drop into the high $70,000s before its next leg up.
Sources: CryptoSlate, Bitcoin.com
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