Bitcoin briefly rallied to $85,500 after a positive inflation report, but settled at $83,700 as high bond yields persisted.
Bitcoin's surge to $85,500 proved to be temporary as persistent high bond yields caused it to stabilize just above $83,700.
Inflation Data Sends Bitcoin Higher Before Bond Yields Apply Pressure
The cryptocurrency initially jumped following a lower-than-expected inflation report, but this momentum waned as Treasury yields remained elevated. On Thursday, Bitcoin saw a modest increase of 0.4%, settling at approximately $83,700 after its brief rise above $85,000 due to positive economic indicators.
In the broader cryptocurrency market, HYPE outperformed, rising about 3% to roughly $89, while Dogecoin increased nearly 2%, nearing 10 cents. Other currencies like Ether, BNB, TRX, and ZEC experienced gains of less than 1%, while XRP held steady at $1.50. Meanwhile, Solana dipped nearly 1%, slipping below $119.
According to Dan Khus, chief analyst at LVRG Research, the August PCE report revealed a more significant slowdown in inflation than anticipated, with year-over-year prices rising by 3.4% and 3.0% when excluding volatile food and energy costs. This has reduced expectations for a Federal Reserve interest rate hike in October, shifting focus to December for potential increases.
Khus pointed out that the crypto market reacted positively to the inflation data, allowing Bitcoin to bounce back above $85,000 as bond yields slightly decreased, making riskier assets more appealing to investors.
However, market dynamics shifted during late trading on Wall Street, as the 10-year Treasury yield lingered around 5.28%, near its recent highs. The 30-year yield stabilized at 5.62% after reaching a 2002 peak. A decline in oil prices contributed to easing bond selloff, while the U.S. dollar saw gains.
Positive momentum from tech stocks carried into Asian markets, with Nasdaq 100 futures up by 0.8% and S&P 500 futures rising by 0.4%. Notably, Japan's Nikkei index surged by 2.7% and South Korea's Kospi gained 1.2%, spurred by favorable forecasts from Micron Technology.
Despite the optimistic inflation figures, Bitcoin's inability to sustain levels above $85,000 highlights the challenge posed by persistent high bond yields, suggesting that a consistent decline in yields is needed for another rally in the cryptocurrency.
