Adjusted for seasonal trends, the Consumer Price Index (CPI) experienced a 0.6% increase for September, following a 0.4% rise in August. A significant contributor to this monthly surge was a 9.1% uptick in gasoline prices, which constituted over half of the overall rise, while costs for housing increased by 0.4%. The core CPI also saw a monthly increase of 0.3%, matching the figure from August and surpassing forecasts of 0.2%.
In response to these figures, Bitcoin reached a low of $81,588.88 on October 14.
A New Rate Hike Would Continue September’s Trend
The Federal Reserve had already lifted its target interest range by 25 basis points to between 3.75% and 4.00% on September 16. Another increase in rates would further tighten monetary policy, with the next meeting set for October 27-28.
Following the CPI report, the two-year Treasury yield climbed to 4.872%, marking a seven basis point rise for the day, while the U.S. dollar appreciated against several currencies. This market response indicates that the surprise inflation figures are altering expectations for future borrowing rates as policymakers prepare for their upcoming meeting.
For those invested in Bitcoin, the impact will largely hinge on whether these higher yields prove to be long-lasting. Increased competition from interest-earning dollar assets may pose challenges for cryptocurrencies like Bitcoin, which do not accrue interest, even if the Federal Reserve opts to keep rates steady in October.
This report follows a recent trend of lower volatility in short-term pricing. On October 12, there was a notable concentration of put options on Deribit priced between $76,000 and $80,000 set to expire on October 16, allowing buyers a means to hedge against potential declines.
The immediate market sentiment reflects heightened concern over the possibility of additional tightening. It remains uncertain whether Bitcoin will hold its ground against such pressures if interest rates remain high as the Federal Reserve’s decision in October approaches.