Bitcoin Jumps on Cool PCE Inflation Data as Bond Yields Hit 20-Year Highs

In brief

• August core PCE rose 3.0% year over year against 3.3% expected, and headline PCE came in at 3.4% versus 3.7%. October rate-hike odds now sit at 34.9%.
• Bitcoin popped above $85,000 to a high of $85,598.94, then eased to $84,376, up 0.9%. That's still inside the range it has held since its September surge.
• On Myriad, traders put just 7% odds on Bitcoin topping its $126,199 all-time high before 2027, and ETF inflows have faded since their $2.4 billion week.

Bitcoin is doing something Wall Street can't right now: staying calm.

The Federal Reserve's preferred inflation gauge, the PCE index, rose 0.3% in August and 3.4% from a year earlier, below the 0.4% and 3.7% economists expected. Core PCE, which strips out volatile food and energy prices, rose 0.2% on the month and 3.0% annually, against forecasts of 0.3% and 3.3%.

Bitcoin reacted, pushing above $85,000 to a high of $85,598.94 before easing back to $84,376.09. The total market capitalization of the crypto ecosystem is up a bit, 0.6%, just below $3 trillion.

The PCE numbers change the October conversation. CME's FedWatch tool now shows a 62% chance the Fed holds rates and a 37% chance of a 25-basis-point hike.

Hike bets had already been fading of late, which bodes well for risk assets. A rate hike means higher borrowing costs across the economy, and it typically strengthens the dollar while lifting returns on cash and government bonds. Lower rates tend to increase market liquidity, which typically means more money flowing into investments like Bitcoin.